Skewness-based market integration: A systemic risk measure across international equity markets

This study develops a novel skewness-based integration measure to assess systemic risk across international equity markets. We exploit skewness to further consider the tail information of return distribution, thereby extend the return-based integration measure of Pukthuanthong and Roll (2009). The empirical results indicate that the skewness-based integration measure is closely correlated with market crashes, Value-at-Risk, and leading indicators of equity markets. Moreover, the skewness-based integration measure improves the information content of systemic risk relative to the return-based integration measure, implying that tail information plays an indispensable role in early warning of systemic risk.