STOCK MARKET REACTION TO BREXIT ANNOUNCEMENTS: EVIDENCE FROM A NATURAL EXPERIMENT

Júlio Lobão () and Sílvia Santos ()
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Júlio Lobão: School of Economics and Management, University of Porto, Rua Dr. Roberto Frias, 4200-464, Porto, Portugal
Sílvia Santos: School of Economics and Management, University of Porto, Rua Dr. Roberto Frias, 4200-464, Porto, Portugal

Global Economy Journal (GEJ), 2019, vol. 19, issue 03, 1-17

Abstract: Using four Brexit-related announcements as a source of exogenous information shocks, we investigate the semi-strong form of efficiency in seven major European stock markets. Our results suggest that only the announcement of the Brexit referendum result produced statistically significant negative cumulative abnormal returns in the markets of the sample. However, with the exception of the Irish stock market, the effects ceased to be significant in a period of five trading sessions after the event. We also document an increase in trading activity, though statistically insignificant, in the day of the referendum and in the following days. Overall, our results are in line with the semi-strong form of market efficiency.

Keywords: EU referendum; Brexit; stock returns; abnormal returns; event study (search for similar items in EconPapers)
Date: 2019
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DOI: 10.1142/S2194565919500180

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