Academic Journal
Market fragility and international market crashes
"Journal of Financial Economics" 16 pages 2012
Journal Details
Journal of Financial Economics, 2012 Vol. 105 Issue 3 Pages 565-580
Finance
Journal Article, Academic Journal
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.