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This paper studies the relationship between monthly economic uncertainty of 20 advanced and emerging markets, and two daily covariates, i.e., exchange rate and stock index, with particular emphasis on the relationship between the variables in response to the Brexit vote. We use a functional data approach supplemented with a point of impact structure to conduct a mixed-frequency analysis. We find that incorporating the point of impact, in this case the Brexit shock, is marginally important relative to models that ignore it. We also find that the exchange rate played a more important role than the equity market in transmitting the Brexit shock to cause heightened uncertainty in the 20 countries considered. Our results have important policy implications.

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The partition function approach is applied to study coalition formation in the Northeast Atlantic mackerel fishery in the presence of externalities. Atlantic mackerel is mainly exploited by the European Union (EU), the United Kingdom (UK), Norway, the Faroe Islands and Iceland. Two games are considered. First, a four-player game where the UK is still a member of the EU. Second, a five-player game where the UK is no longer a member of the union. Each game is modeled in two stages. In the first stage, players form coalitions following a predefined set of rules. In the second stage, given the coalition structure that has been formed, each coalition chooses the economic strategy that maximizes its own net present value of the fishery, given the behavior of the other coalitions. The game is solved using backward induction to obtain the set of Nash equilibria coalition structures in pure strategies, if any. We find that the current management regime is among the stable coalition structures in all eight scenarios of the four-player game but in only one case of the five-player game. In addition, stability in the five-player game is sensitive to the growth function applied and the magnitude of the stock elasticity parameter.

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.

Investigating the effects of Brexit on firms’ innovation behavior is pivotal to understand future possible economic growth and welfare effects of such policy decisions in the UK. By applying a difference-in-difference (DID) methodology on a sample of 2846 firm-year observations from 2013 to 2018, we address this question observing a decrease in UK firms’ research and development expenses compared to European firms. Specifically, we observe an R&D decrease of UK firms of about 10%, and of about 1.3% compared to EU firms. Our results offer important evidence for policymakers and UK regulators, warning on the future detrimental impact of Brexit on UK firms’ innovation policies.

This empirical study on European stocks gives evidence about the practices of high frequency traders (HFTs) under market stress. In the absence of significant news, whatever the market conditions, they are the main contributors to liquidity with a participation of 80% in the market depth. They constitute 60% of the traded amounts, with an aggressive/passive ratio around 53%. We identify a change of regime in the presence of scheduled news that goes beyond the expected reaction to volatility variations. Moreover, in extreme situations, when non-HFTs have time to adjust their tactics, they act as liquidity providers in place of HFTs.

The visit of UK Prime Minister Theresa May to China in January and February 2018 was less golden than the “golden era” of Sino-British cooperation touted by both countries. May refused to formally endorse China’s Belt and Road Initiative, the Chinese government’s project of connecting China with Asia, Russia, Europe, Middle East and Africa through infrastructure projects. The UK’s bargaining position was weakened with Brexit, and that was evident during May’s visit to China.

On June 23, 2016, the UK decided to leave the European Union (EU), commonly known as “Brexit”. The UK has two years to conclude their new arrangement with the EU27 after evoking Article 50 Treaty of Lisbon officially, which it did on March 27, 2017. While there is a range of possible trade agreements most are unlikely as they would either imply repudiating firm EU legal principles or strong promises that the current UK government is committed to maintain. The article discusses these options. Moreover, the article focuses on the trade and investment flows between the UK and EU27 and discusses the possible short-term implications of Brexit with a specific attention to the most impacted sector, that of financial services.

The partition function approach is applied to study coalition formation in the Northeast Atlantic mackerel fishery in the presence of externalities. Atlantic mackerel is mainly exploited by the European Union (EU), the United Kingdom (UK), Norway, the Faroe Islands and Iceland. Two games are considered. First, a four-player game where the UK is still a member of the EU. Second, a five-player game where the UK is no longer a member of the union. Each game is modeled in two stages. In the first stage, players form coalitions following a predefined set of rules. In the second stage, given the coalition structure that has been formed, each coalition chooses the economic strategy that maximizes its own net present value of the fishery, given the behavior of the other coalitions. The game is solved using backward induction to obtain the set of Nash equilibria coalition structures in pure strategies, if any. We find that the current management regime is among the stable coalition structures in all eight scenarios of the four-player game but in only one case of the five-player game. In addition, stability in the five-player game is sensitive to the growth function applied and the magnitude of the stock elasticity parameter.

In the 12 months from the middle of June 2016 to the middle of June 2017, a number of events occurred in a relatively short period of time, all of which either had, or had the potential to have, a considerably volatile impact upon financial markets.

The events referred to here are the Brexit referendum (23 June 2016), the US election (8 November 2016), the 2017 French elections (23 April and 7 May 2017) and the surprise 2017 UK parliamentary election (8 June 2017).

All of these events—the Brexit referendum and the Trump election in particular—were notable both for their impact upon financial markets after the event and the degree to which the markets failed to anticipate these events. A natural question to ask is whether these could have been predicted, given information freely available in the financial markets beforehand. In this paper, we focus on market expectations for price action around Brexit and the Trump election, based on information available in the traded foreign exchange options market.