Measuring market integration during crisis periods  

Sungjun Cho, Stuart Hyde, Weiping Qin

Research output: Contribution to journalArticlepeer-review


Pukthuanthong and Roll (2009) measure the degree of market integration by the percentage of a market’s returns explained by global risk factors. However, during periods of crisis characterised by high volatility, their measure may be biased. This paper investigates the determinants of the explanatory power in a multi-factor model during global crises. We show that the explanatory power is influenced by factor heteroscedasticity, changes in factor loadings and residual heteroscedasticity. Using a counterfactual analysis, we establish an empirical framework to examine the effects of each element on integration for 53 financial markets during six recent crisis periods. We find the unconditional market integration is much lower for most markets during a period of crisis than implied. Both factor heteroscedasticity and the existence of contagion during crises account for this difference.
Original languageEnglish
Article number101555
JournalJournal of International Financial Markets, Institutions & Money
Early online date23 Mar 2022
Publication statusPublished - 1 May 2022


  • Contagion
  • Factor heteroscedasticity
  • Financial crisis
  • Market integration


Dive into the research topics of 'Measuring market integration during crisis periods  '. Together they form a unique fingerprint.

Cite this