The paper investigates the market reaction to three different events related to Brexit through an event study analysis, i.e. the announcements of the referendum date (20 February 2016), the referendum result (23 June 2016) and the election of Theresa May as Prime Minister (11 July 2016). We study the impact of these announcements on stock prices of UK companies belonging to export- and import-oriented industries. We also investigate the influence of previous events on stock prices of European companies belonging to the same sectors. Our results show that financial markets did not perceive the announcement of the referendum date and the election of Theresa May as Prime Minister as elements of political uncertainty. However, in the days before the referendum, investors priced it as an uncertain political event. The text analysis conducted on mass media sentiment about Brexit mainly supports the results of our event studies. Stock market performance around the events depends more on industry factors than on firm-specific characteristics, for both UK and EU companies. The only exception is company size, which positively affects investor reaction.

Cucinelli, D., Farina, V., Schwizer, P., Soana, M. (2020). Better the Devil You Know: The Impact of Brexit Political Uncertainty on European Financial Markets. INTERNATIONAL JOURNAL OF BUSINESS AND MANAGEMENT.

Better the Devil You Know: The Impact of Brexit Political Uncertainty on European Financial Markets

Doriana Cucinelli;Vincenzo Farina;Maria Gaia Soana
2020-01-01

Abstract

The paper investigates the market reaction to three different events related to Brexit through an event study analysis, i.e. the announcements of the referendum date (20 February 2016), the referendum result (23 June 2016) and the election of Theresa May as Prime Minister (11 July 2016). We study the impact of these announcements on stock prices of UK companies belonging to export- and import-oriented industries. We also investigate the influence of previous events on stock prices of European companies belonging to the same sectors. Our results show that financial markets did not perceive the announcement of the referendum date and the election of Theresa May as Prime Minister as elements of political uncertainty. However, in the days before the referendum, investors priced it as an uncertain political event. The text analysis conducted on mass media sentiment about Brexit mainly supports the results of our event studies. Stock market performance around the events depends more on industry factors than on firm-specific characteristics, for both UK and EU companies. The only exception is company size, which positively affects investor reaction.
2020
Pubblicato
Rilevanza internazionale
Articolo
Esperti anonimi
Settore SECS-P/11 - ECONOMIA DEGLI INTERMEDIARI FINANZIARI
English
Brexit, event study, stock market reaction, import, export, text analysis
Cucinelli, D., Farina, V., Schwizer, P., Soana, M. (2020). Better the Devil You Know: The Impact of Brexit Political Uncertainty on European Financial Markets. INTERNATIONAL JOURNAL OF BUSINESS AND MANAGEMENT.
Cucinelli, D; Farina, V; Schwizer, P; Soana, M
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/2108/320859
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