Identifying the significant drivers of containerized freight rates: From the perspective of dynamic multiscale...

In August 2023, the launch of Shanghai Containerized Freight Index (SCFI) futures provides a suitable tool for risk management in the container shipping market, as well as new options for risk management of other financial assets. However, limited research exists on the influencing factors behind container freight rate fluctuations. This paper explores the nonlinear dynamic interdependence between the SCFI and 12 factors from the stock, commodity, carbon, and other markets using a data decomposition-reconstruction-based time-varying copula method, which can assist the stakeholders in hedging risk at different timescales. The findings reveal that most factors show no or limited upper tail dependence with SCFI in the short term. Medium- and long-term dependence is significantly stronger, indicating structural connections over longer horizons. Moreover, the dependence intensifies during extreme risk events. Generally, downside tail risks exert a greater influence on SCFI in the medium to long term, while upside tail risks are found to affect SCFI at any time horizon. This paper focuses on the tail risk interdependence analysis between SCFI and other assets, because the launch of SCFI futures makes the stakeholders to use this future to build risk management portfolios with other assets inevitably. The result provides useful implications to stakeholders with varying financial or investment attributes associated with shipping industry, aiding them in clarifying the different tail risk associations between SCFI futures and other assets at different timescales.