The influence of COVID-19 epidemic on BDI volatility: An evidence from GARCH-MIDAS model.

ABSTRACT

In this study, we use the sample data from Jan 22, 2020 to Jan 21, 2022 to investigate the impacts of added infection number on the volatility of BDI. Under this structure, the control variables (freight rate, Brent crude oil price, container idle rate, port congestion level, global port calls) are added to test whether the information contained in the added infection number is covered. In the GARCH-MIDAS model, we divide the volatility of BDI into the long-term and short-term components, then employ in the least squares regression to empirically test the influences of added infection number on the volatility. From the analysis, we find the added infection numbers effectively impact the BDI volatility. In addition, whether the freight rate, Brent crude oil price, container idle rate, port congestion level, global port calls and other variables are considered alone or at the same time, further the added infection number still significantly influences the volatility of BDI. By studying the ability of the confirmed number to explain the volatility of BDI, a new insight is provided for the trend prediction of BDI that the shipping industry can take the epidemic development of various countries as a reference to achieve the purpose of cost or risk control.