Market Fragility and International Market Crashes

62 Pages Posted: 7 Nov 2011 Last revised: 24 Dec 2012

See all articles by Dave Berger

Dave Berger

Oregon State University

Kuntara Pukthuanthong

University of Missouri, Columbia

Date Written: November 6, 2011

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, especially across markets, 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.

Keywords: Financial crises, Systemic risk

JEL Classification: G01, G15

Suggested Citation

Berger, Dave and Pukthuanthong, Kuntara, Market Fragility and International Market Crashes (November 6, 2011). Journal of Financial Economics 2012, 105(3), 565-580, Available at SSRN: https://ssrn.com/abstract=1955748

Dave Berger

Oregon State University ( email )

Bexell Hall 200
Corvallis, OR 97331
United States

Kuntara Pukthuanthong (Contact Author)

University of Missouri, Columbia ( email )

Robert J. Trulaske, Sr. College of Business
403 Cornell Hall
Columbia, MO 65211
United States
6198076124 (Phone)

HOME PAGE: https://www.kuntara.net/

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