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Global market integration: An alternative measure and its application

  • Pukthuanthong, Kuntara
  • Roll, Richard
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    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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    File URL: http://www.sciencedirect.com/science/article/B6VBX-4WSY4HH-1/2/a18162ab6cfeda4f321c169c86ddd46c
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    Article provided by Elsevier in its journal Journal of Financial Economics.

    Volume (Year): 94 (2009)
    Issue (Month): 2 (November)
    Pages: 214-232

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    Handle: RePEc:eee:jfinec:v:94:y:2009:i:2:p:214-232
    Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505576

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