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Global market integration: An alternative measure and its application

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  • Pukthuanthong, Kuntara
  • Roll, Richard

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.

Suggested Citation

  • Pukthuanthong, Kuntara & Roll, Richard, 2009. "Global market integration: An alternative measure and its application," Journal of Financial Economics, Elsevier, vol. 94(2), pages 214-232, November.
    • Handle: RePEc:eee:jfinec:v:94:y:2009:i:2:p:214-232
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