Volatility spillovers across European stock markets around the Brexit referendum

Hong Li, Shamim Ahmed and Thanaset Chevapatrakul

No 2016/06, Discussion Papers from University of Nottingham, Centre for Finance, Credit and Macroeconomics (CFCM)

Abstract: The vote of the people of the United Kingdom to leave the European Union following the referendum on June 23, 2016, created tremendous uncertainty in the financial markets. This paper documents the stock market interdependence across four major European markets around this rare and unique event. We uncover the characteristics of the volatility spillover dynamics across France, Germany, Switzerland and the United Kingdom using intraday data at 15-minute intervals. Specifically, we quantify four types of volatility spillover measures: total (non-directional) spillovers, gross directional spillovers, net directional spillovers, and net pairwise spillovers. Our results point to considerable interdependence among the four stock markets. We find that France and Germany were in general the net volatility transmitters to others, while Switzerland and the United Kingdom the net receivers from others during January 4, 2016 to September 30, 2016. Around the day of the Brexit referendum, France and the United Kingdom appear to be net transmitters, while Germany and Switzerland net receivers. Our empirical analysis uncovers important information regarding stock market interdependence, which will be beneneficial to both policymakers and practitioners.

Keywords: Market risk; Stock market; Spillover effect; Vector autoregression; and Variance decomposition. (search for similar items in EconPapers)
Date: 2016
New Economics Papers: this item is included in nep-eec, nep-fmk, nep-net and nep-rmg
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:not:notcfc:16/06

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