Please use this identifier to cite or link to this item: https://hdl.handle.net/10356/78401
Title: Predictive accuracy of the RSI in the shipping freight market
Authors: Koh, Perlyn Wen Yi
Keywords: DRNTU::Engineering::Maritime studies
Issue Date: 2019
Abstract: The shipping industry suffers from an irrational behaviour in ship asset management. Studies have shown the prevalence of herd behaviour in this industry; shipowners prefer to be in line with its competitors and thus expose themselves to huge business risks. This is especially so during the economic boom in 2006 and 2007, the temporary demand spike in shipping had spurred ship owners to make new vessel orders, in hope to enjoy greater market share. However, little did they know that their behaviour had led to today’s problem of severely suppressed freight caused by the oversupply of world’s fleet and the lack of cargo demands. In fact, effective ship asset management should be countercyclical; buying vessels when prices are low and selling them after reaping sufficient returns. The active buying and selling of ships is called asset play. Studies have proven the need for asset play in one’s ship asset management strategy. The traditional buy and hold strategy is essential for meeting long-term goals. However, asset play is required in achieving short-term objectives and boosting returns of investment. As we know, shipping has very high barriers of entry and exit, a capital intensive one and thus, the lack of predictive mechanism industry could make it difficult for ship owners to adopt asset play vessel management strategy. Therefore, this research examines the efficacy of using a technical indicator, the Relative Strength Index (RSI), in assisting ship owners to make the right market entrance and exit decisions. The RSI is one of the most popular and an easy-to-use technical indicator in the financial market. It uses historical data to measure the speed and magnitude of the change in ship price and determine buying and selling points. This paper focuses on the use of RSI in the container shipping market. To examine the effectiveness of this tool, it was applied on two different vessel sizes. A comparison was also made with the buy-hold results to assess the applicability of the RSI. The use of RSI would not be worth if ship owners are better off using the buy-hold strategy. The RSI was found to be effective for the container shipping market under certain circumstances. Implication of this finding is that the RSI can be used, however, different RSI parameters should be adopted to different vessel size.
URI: http://hdl.handle.net/10356/78401
Schools: School of Civil and Environmental Engineering 
Rights: Nanyang Technological University
Fulltext Permission: restricted
Fulltext Availability: With Fulltext
Appears in Collections:CEE Student Reports (FYP/IA/PA/PI)

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