TitleMarket fragility and international market crashes
Publication TypeJournal Articles
Year of Publication2012
AuthorsBerger, D, Pukthuanthong, K
JournalJournal of Financial Economics
Volume105
Issue3
Pagination565-580
Date Published2012
KeywordsFinance, MBA
Abstract

We extend the Pukthuanthong and Roll (2009) measure of integration to provide an estimate of systemic risk within international equity markets. Our measure indicates an increasing likelihood of market crashes. The conditional probability of market crashes increases substantially following increases of our risk measure. High levels of our risk measure indicate the probability of a global crash is greater than the probability of local crash. That is, conditional on high levels of systemic risk, the probability of a severe crash across multiple markets is larger than the probability of a crash within a smaller number of markets.

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