What makes a freight market index? An empirical analysis of vessel fixtures in the offshore market

We estimate a hedonic pricing regression to generate a market index from heterogeneous fixture data in the Offshore Support Vessel (OSV) market. We consider a fixed effect framework where we control for vessel characteristics and contract-specific variables. Applied to a dataset of more than 30,000 transactions from 1989 to 2015, estimates show that around 70-80% of variation in dayrates is explained by the time fixed effects used to estimate the market index. Spot freight rates increase with engine power and transport capacity. The volatile market index is seasonal and is positively correlated to both oil prices and production volumes.