Review of Industrial Organization 22: 93–95, 2003.
Risk and Return in Transportation and Other U.S. and Global Industries, Manolis
G. Kavussanos and Stelios N. Marcoulis. Boston: Kluwer Academic Publishers,
2001, 174 pages, $100.
This book assesses stock returns of the water transport industry and compares
these returns to other transport industries (air, truck and rail) as well as utilities
(gas and electric). The stated objective of the book apparently is to evaluate the
risk-return trade-off in water transport, though it is not clear whether the authors
believe that the industry is high-risk or low-risk, a priori. The authors assert that
risk in water transport is primarily due to the high level of capital investment (not
unlike rail). However it is not clear whether this high capital cost makes water
shipping a higher-risk investment than the other industries to which it is compared.
Absent a theoretically-based motivation, the main goal of the book appears to be to
compare returns in different industries using different estimation techniques. Little
attention is given to the industry implications of their results. Given this, the book
mainly seems geared to those interested in transportation ﬁnance rather than those
interested in transportation policy and analysis.
The book begins with a presentation of basic stock analysis, describing the stock
selection process as well as reviewing the relevant literature on stock returns. The
remainder of the ﬁrst chapter provides a brief description of the industries used in
the models. The overview of these industries is helpful for those unfamiliar with
the basics of the industries under investigation, though the statistics presented are
clearly dated (most cited are from the mid 1990s). This is especially problematic
in the analysis of rail, which has seen large-scale mergers (Burlington Northern
and Santa Fe Paciﬁc; Union Paciﬁc and Southern Paciﬁc; and the 1998 division
of Conrail). Merger is given only brief mention and the focus is on the positive
aspects of merger in rail, no mention is made of the more recent ﬁnancial woes of
rail in the post-merger period.
The second appendix to Chapter One lists the companies included in the empir-
ical analyses. Examination of this list raises issues with the choice of companies.
The authors indicate that they eliminated companies that were listed under more
than one industry (one assumes from this that they mean more than one industry
which is included in the analysis). Some of the companies included seem ques-