Global asset allocation provides risk diversification. But international market correlation increases sharply during global crises and diversification benefit disappears when it is most needed. We model these correlation breaks and derive the asset allocation implications. The model can quickly...

We propose a new approach to identify drivers of global market integration using an advanced machine learning technique. We differentiate across economic and financial integration as well as across emerging and developed countries. Our approach allows for nonlinear relationships, corrects for...

Global equity management has historically been structured around country asset allocation. This approach was supported by the observations that the country factor is the major source of influence on stock-price behavior and that the correlation between equity and currency is close to zero and...

Departures from purchasing power parity imply that different countries have different prices for goods when a common numeraire is used. Stochastic changes in exchange rates are associated with changes in these prices and constitute additional sources of risk in asset pricing models. This paper...

We propose a simple metric to measure two aspects of market integration, namely economic integration (defined as a common cash flow dynamic) and financial integration (defined as a common risk pricing dynamic) and then examine their evolution through time while controlling for volatility. We...