Measuring Financial Integration: Evidence from Ten Industries in a “US-Emerging World”

Michael Donadelli

A chapter in Risk Management Post Financial Crisis: A Period of Monetary Easing, 2014, vol. 96, pp 153-178 from Emerald Group Publishing Limited

Abstract: This chapter measures financial integration in 10 industries over 4 different periods. We use two robust measures of integration: (i) the Pukthuanthong and Roll (2009)’s multi-factorR-square and (ii) the Volosovych (2011)’s integration index. Both measures, based on PCA, indicate that the difference between the level of integration over the period 2009–2012 (“Post-Lehman” era) and the level of integration over the period 1994–1998 (“Post-Liberalizations” era) is relatively high. In addition, the level of financial integration across international equity markets decreased during the late 1990s. This suggests that de jure integration does not necessarily improve de facto integration. Overall, our findings give rise to a “diversification benefits-insurance benefits trade-off.”

Keywords: Financial integration; industries; R-square; integration index; PCA; F3; F4; G1 (search for similar items in EconPapers)
Date: 2014
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Persistent link: https://EconPapers.repec.org/RePEc:eme:csefzz:s1569-375920140000096005

DOI: 10.1108/S1569-375920140000096005

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