Are UK industries resilient in dealing with uncertainty? The case of Brexit

Refk Selmi Jamal Bouoiyour
Authors registered in the RePEc Author Service: Jamal Bouoiyour () and Refk Selmi

European Journal of Comparative Economics, 2018, vol. 15, issue 2, 277-292

Abstract: Given the European Union (EU)’s central role in regulating various sectors, the decision to leave poses profound questions for UK industries in upheaval. This paper adopts an event-study methodology to examine, at sectoral level, the dynamics of stock prices surrounding the announcement of the UK’s EU membership referendum on 24 June 2016. We find that the adjustment of stock prices is inconsistent with the Uncertain Information Hypothesis assuming that policy changes are typically associated to a decrease of stock prices, but once the uncertainty-induced event is reduced, stock prices would increase again. Analyzing seven sectors of British stock index, we show that the Brexit had a significant impact on the valuation of UK companies. While all industries face increasing uncertainty, the referendum outcome had varying sectoral effects. Specifically, the responses of banks and financial services, defense and airlines, real estate and technology to the Brexit event were even more severe than the reactions of oil and gas, pharmaceuticals and consumer goods. The lack of opportunity to benefit from the European passporting rules to establish businesses, to access to EU’s Research and Development funds and to hire the skilled workers have been offered to explain the adverse effects of Brexit on UK industries.

Keywords: Brexit; uncertainty; stock market; sectoral-level analysis; UK; event-study methodology. (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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Related works:
Working Paper: Are UK industries resilient in dealing with uncertainty? The case of Brexit (2018)
Working Paper: Are UK industries resilient in dealing with uncertainty? The case of Brexit (2016)
Working Paper: Are UK industries resilient in dealing with uncertainty? The case of Brexit (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:liu:liucej:v:15:y:2018:i:2:p:277-292

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