Global market integration: An alternative measure and its application |
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Authors: | Kuntara Pukthuanthong Richard Roll |
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Affiliation: | 1. Department of Finance, San Diego State University San Diego, CA 92182, USA;2. UCLA Anderson, 110 Westwood Plaza, Los Angeles, CA 90095, USA |
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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. |
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Keywords: | F15 F36 G12 G11 G15 |
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