Market fragility and international market crashes

Dave Berger and Kuntara Pukthuanthong

Journal of Financial Economics, 2012, vol. 105, issue 3, 565-580

Abstract: We extend the Pukthuanthong and Roll (2009) measure of integration to provide an estimate of systemic risk within international equity markets. Our measure indicates an increasing likelihood of market crashes. The conditional probability of market crashes increases substantially following increases of our risk measure. High levels of our risk measure indicate the probability of a global crash is greater than the probability of a local crash. That is, conditional on high levels of systemic risk, the probability of a severe crash across multiple markets is larger than the probability of a crash within a smaller number of markets.

Keywords: Financial crises; Systemic risk; Crash; Fragility (search for similar items in EconPapers)
JEL-codes: G01 G15 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (23)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:105:y:2012:i:3:p:565-580

DOI: 10.1016/j.jfineco.2012.03.009

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