Global market integration: An alternative measure and its application

Kuntara Pukthuanthong and Richard Roll

Journal of Financial Economics, 2009, vol. 94, issue 2, 214-232

Abstract: Global markets seem to be increasingly integrated but there is no well-accepted measure of integration. We show that the correlation across markets is a poor measure; perfectly integrated markets can exhibit weak correlation. We derive a new integration measure based on the explanatory power of a multi-factor model and use it empirically to investigate recent trends in global integration. For most countries, there has been a marked increase in measured integration over the past three decades, but this is not indicated by correlations among country indexes.

Keywords: Market; integration; Correlation; International; market; Factor; analysis (search for similar items in EconPapers)
Date: 2009
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Citations: View citations in EconPapers (302)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:94:y:2009:i:2:p:214-232

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