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Diversification Properties of Investments in Shipping

Michael B Grelck, Stefan Prigge, Lars Tegtmeier and Mihail Topalov
The Journal of Alternative Investments Summer 2009, 12 (1) 55-74; DOI: https://doi.org/10.3905/JAI.2009.12.1.055
Michael B Grelck
is managing director of Dr. Grelck Consulting GmbH, in Hamburg, Germany.
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  • For correspondence: grelck@drg-ub.com
Stefan Prigge
is a professor of corporate finance and corporate accounting at the HSBA Hamburg School of Business Administration in Hamburg, Germany.
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  • For correspondence: prigge@web.de
Lars Tegtmeier
is a managing director of TKL. Fonds Gesellschaft für Fondsconception und—analyse mbH in Hamburg, Germany.
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  • For correspondence: tegtmeier@tkl-fonds.de
Mihail Topalov
is a managing director of TKL. Fonds Gesellschaft für Fondsconception und—analyse mbH in Hamburg, Germany.
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  • For correspondence: topalov@tkl-fonds.de
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Abstract

In contrast to the more established alternative asset classes like real estate or hedge funds, there is not much research available for investments in shipping. This article contributes to closing this gap in the literature and investigates the diversification properties of investments in shipping. During the sample period, an investment in shipping stocks earned an attractive risk-return combination. In general, the addition of an investment in shipping stocks to a base portfolio of stocks and bonds enhanced diversification. The results also reveal other insights. First, the composition of the shipping stocks portfolio mattered much. Compared with the MSCI World Marine Index, which is a capitalization-weighted aggregate of 10 stocks, the diversification benefit of the broader and equally-weighted shipping stocks portfolio of our Research Index, with 41 stocks, was much more pronounced and somewhat statistically significant. Second, diversification properties were not stable through the course of time with larger diversification benefits during the bear market from March 2000 to March 2003 compared to the bull market from April 2003 to October 2007. The positive overall view of the diversification properties of shipping stocks is based on a single full stock market cycle.

TOPICS: Real assets/alternative investments/private equity, global, security analysis and valuation, portfolio construction

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Diversification Properties of Investments in Shipping
Michael B Grelck, Stefan Prigge, Lars Tegtmeier, Mihail Topalov
The Journal of Alternative Investments Jun 2009, 12 (1) 55-74; DOI: 10.3905/JAI.2009.12.1.055

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Diversification Properties of Investments in Shipping
Michael B Grelck, Stefan Prigge, Lars Tegtmeier, Mihail Topalov
The Journal of Alternative Investments Jun 2009, 12 (1) 55-74; DOI: 10.3905/JAI.2009.12.1.055
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  • Article
    • Abstract
    • LITERATURE REVIEW
    • HYPOTHESES
    • DATABASE AND DESCRIPTIVE STATISTICS
    • EFFICIENT FRONTIER ANALYSIS
    • SIGNIFICANCE TEST OF THE DIVERSIFICATION PROPERTIES
    • ROBUSTNESS CHECKS
    • CONCLUSION
    • ENDNOTES
    • REFERENCES
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