An Empirical Study of the Salmon Market : Is there a relationship between the spot price of fresh farmed salmon and a portfolio of salmon farming companies listed on Oslo Stock Exchange?

Abstract

Salmon has become one of the most important export incomesfor Norway, and it is an industry that is still growing. Norway holds a big part of the salmon market, ifbig fluctuationsoccurin the salmon market, itmayalso have a big impact on the Norwegian business sector. It is therefore a huge motivation for us to investigate this marketand the purpose of this master thesis is to examine whetherifthere existsa relationship between a portfolio consisting of salmon farming companies listed at Oslo Stock Exchange and thespot price offresh farmed salmon.We thereforewant toanalyze this relationshipand see if we can find any evidence suggesting a correlation between our two variablesusing different models. The analysis isbased on aunique dataset with weekly observationsof our portfolio and the salmon pricebetween 2000 and 2018. We will first estimate our dataset in a vector autoregressive model andthen test forcausality. Later, we expand our model to an error correction model and a vector error correction model to investigate the long-term relationship. Our findings indicatea strong significant relationship between the variables, both in short-term and long-term, where the error correction term slowly corrects for previous periods disequilibriumtowardsthe steady state.In the short-term our findings indicate a unidirectional relationship where the spot price could be predicted by previous values of portfolio index. But in the long-term there is a two-way relationship where they both influence each other.