  We propose a confirmatory dynamic factor model for a large number of daily
returns across multiple time zones. The model has a global factor and three
continental factors. We propose two estimators of the model: a quasi-maximum
likelihood estimator (QML-just-identified), and an improved estimator
(QML-all-res). Our estimators are consistent and asymptotically normal. In
particular, the asymptotic distributions of QML-all-res are the same as those
of the infeasible OLS estimators that treat factors as known and utilize all
the restrictions of the parameters of the model. We apply the model to MSCI
equity indices of 42 developed and emerging markets, and find that the market
is more integrated when the US VIX is high.
