Papadatos, Martsin with George Dikos, Henry Marcus and Vassilis Papakonstantinou, "Inverse System Dynamics in Competitive Economic Modelling: The Case of Tanker Freight Rates", 2005 July 17-2005 July 21
ua435
A system identification approach is used in order to model and identify the structural relationship
between freight rates in the tanker industry and a set of exogenous inputs. Our motivation results from
the limited data availability and the prohibitive theoretical complexity of economic models for the
evaluation of managerial decisions and risk management. The combination of statistical analysis and
economic insight leads to an innovative multidisciplinary approach for modelling competitive economic
systems. We calibrate the model with real data from 1980-2002, achieve estimation and identification
of the system and fully track the directional changes in freight rates. After conducting performance
evaluation an innovative hybrid model is introduced and system performance is maximized both within
and out-of-sample. Finally we discuss potential uses of this model for policy analysis, managerial
investment decisions and risk management.