How is the volatility rate calculated?
In the column under “Min/Max last 12 mos” is the highest and the lowest value of the respective index for the last twelve months. In the column named “Min/Max volatility” in the first position is the differential between those two values. Below is the calculated percentage of the differential from the actual (“today’s”) value. For example in today’s report this means that in the last twelve months the differential between the highest and lowest BCI value is 4,132, which is 60% from today’s 6,914.
What does the volatility rate tell you about the index?
The volatility rate indicates how much fluctuation the index has shown in a period of twelve months. If you compare, for example, the volatility rate of the BCI (59%) to that of the BHSI (36%), you can say that the index volatility of the BCI is much higher than the BHSI’s. Or, said another way, the BHSI’s developement is more stable than the BCI.
Note: the volatility rate does not indicate an index trend upwards or downwards, but the amplitude of the movement, regardless of directions, compared to the actual total index value (a differential of 500 points compared to an actual index value of 1,000 weighs more than that same differential compared to an actual value of 3,000). This means, the volatility rate tells you something about this particular market over a longer time period, even if it doesn’t necessarily tell you a lot about today’s value.
Is a high volatility rate good or bad?
This depends on your point of view. For many market players a high volatility means that the market is active and high profits can be made. On the other hand, a high volatility also means that high profits can more easily turn into deep deficits. A market with a low volatility rate is quite stable, which doesn’t mean that rates are not rising, but that they do so more moderately and with less risk.
What causes volatility?
As is well known, there are many influencing factors on shipping rate development (economic factors of supply and demand but also factors like weather, congestion or – not to forget – oil prices). However, in today’s market it seems that not only the amplitude of fluctuations grows but, even more so, these up and down movements are accelerating. This is in BMTI’s opinion the result in part of the increasing amount of market information available through modern communication channels like the internet, which allows market players to react faster on hot market news. In times past, such information would have taken much longer to get around (and would have conceviably “cooled” in the process).