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

JÚLIO LOBÃO

School of Economics and Management, University of Porto, Rua Dr. Roberto Frias, 4200-464, Porto, Portugal

E-mail Address: jlobao@fep.up.pt

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and

SÍLVIA SANTOS

School of Economics and Management, University of Porto, Rua Dr. Roberto Frias, 4200-464, Porto, Portugal

E-mail Address: 201203966@fep.up.pt

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https://doi.org/10.1142/S2194565919500180Cited by:3 (Source: Crossref)

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:

JEL Classification: G12, G14, G15

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