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Does Brexit Have a Bullish or Bearish Effect on the Taiwan Stock Market?

Author

Listed:
  • Jing Long Yu

    (Doctoral Student, Department of Finance, National Yunlin University of Science and Technology, Taiwan)

  • Tse Mao Lin

    (Adjunct Lecturer, Department of Finance, National Yunlin University of Science and Technology, Taiwan)

  • Xin Hui Wu

    (Master, Department of Finance, National Yunlin University of Science and Technology, Taiwan)

Abstract

Using the event study method to analyze one year of daily trading data of formal and Over-The-Counter (OTC) stocks in Taiwan, this study investigates whether the Brexit referendum led to abnormal returns, as well as the financial characteristics of the stocks, and the influential financial variables. The Taiwan stock market had negative abnormal returns on the day of the Brexit referendum. The high-abnormal return group was more significantly affected than the low-abnormal return group. The book-to-market ratio, price-to-earnings ratio, yield rate, average foreign shareholding ratio, and stocks overbought and oversold had a more significant impact on the low-abnormal return group. Abnormal returns were generated mostly in the OTC (Over-The-Counter) market. This event affected financial stocks more significantly than electronics and information technology stocks. The effects on formal stocks, OTC (Over-The-Counter) stocks, and the overall market were the most significant for the turnover rate and stocks overbought and oversold, yield rate, and turnover rate and book-to-market ratio, respectively. The results confirm that the model of the impact of a special event on the behavioral response in the Taiwan stock market can be used to predict changes in stock market prices when a special event occurs in the future.

Suggested Citation

  • Jing Long Yu & Tse Mao Lin & Xin Hui Wu, 2021. "Does Brexit Have a Bullish or Bearish Effect on the Taiwan Stock Market?," International Journal of Economics and Financial Research, Academic Research Publishing Group, vol. 7(3), pages 90-101, 09-2021.
    • Handle: RePEc:arp:ijefrr:2021:p:90-101
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    References listed on IDEAS

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