Presentation Title

The Effect of the Brexit Vote on Global Stock Markets

Presenter Information

DaEun LeeFollow

Faculty Mentor

Roger White

Start Date

18-11-2017 11:15 AM

End Date

18-11-2017 11:30 AM

Location

9-251

Session

Interdisciplinary 2

Type of Presentation

Oral Talk

Subject Area

business_economics_public_administration

Abstract

On June 23, 2016, the United Kingdom held a referendum to determine whether they would remain a member of the European Union. The decision to leave the EU created political and financial uncertainty and impacted stock markets, worldwide. This study examines the effects of the Brexit vote on stock markets, and considers whether the levels of economic and cultural integration of countries that are homes to stock markets with the UK influenced the extent to which the respective stock markets were affected. This is significant information, as we see how important economic and cultural integration may be for determining the transmission of international events across stock markets in different countries. Employing stock market data from the Wall Street Journal, we use day-to-day stock index prices to complete a regression analysis-based event study in which we determine whether the difference between predicted stock market prices and actual prices on the day the Brexit vote was revealed is statistically significant. The analysis includes stock markets located throughout the world - in Australia, China, Japan, New Zealand, the Eurozone, Italy, and the Americas. After estimating the differences between the predicted and actual stock market index values, we look at the levels of economic and cultural integration to determine whether or not these variables impact the extent of stock market changes. The results indicate that large political events, particularly results that were unpredicted, have largely negative effects on stock index values worldwide. The results also indicate that the more economically- and culturally-integrated the countries are, the larger is the respective change in stock index values in response to the event. Economic integration is be defined by the trade relationship of individual countries with the UK as noted by the UK Office for National Statistics. Cultural integration is measured using Hofstede’s cultural dimensions.

Summary of research results to be presented

The results indicate that large political events, particularly results that were unpredicted, have largely negative effects on stock index values worldwide. The results also indicate that the more economically- and culturally-integrated the countries are, the larger is the respective change in stock index values in response to the event.

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Nov 18th, 11:15 AM Nov 18th, 11:30 AM

The Effect of the Brexit Vote on Global Stock Markets

9-251

On June 23, 2016, the United Kingdom held a referendum to determine whether they would remain a member of the European Union. The decision to leave the EU created political and financial uncertainty and impacted stock markets, worldwide. This study examines the effects of the Brexit vote on stock markets, and considers whether the levels of economic and cultural integration of countries that are homes to stock markets with the UK influenced the extent to which the respective stock markets were affected. This is significant information, as we see how important economic and cultural integration may be for determining the transmission of international events across stock markets in different countries. Employing stock market data from the Wall Street Journal, we use day-to-day stock index prices to complete a regression analysis-based event study in which we determine whether the difference between predicted stock market prices and actual prices on the day the Brexit vote was revealed is statistically significant. The analysis includes stock markets located throughout the world - in Australia, China, Japan, New Zealand, the Eurozone, Italy, and the Americas. After estimating the differences between the predicted and actual stock market index values, we look at the levels of economic and cultural integration to determine whether or not these variables impact the extent of stock market changes. The results indicate that large political events, particularly results that were unpredicted, have largely negative effects on stock index values worldwide. The results also indicate that the more economically- and culturally-integrated the countries are, the larger is the respective change in stock index values in response to the event. Economic integration is be defined by the trade relationship of individual countries with the UK as noted by the UK Office for National Statistics. Cultural integration is measured using Hofstede’s cultural dimensions.