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Is uncertainty over Brexit damaging the UK and European equities?

Author

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  • Bouoiyour, Jamal
  • Selmi, Refk

Abstract

The possibility the UK might leave the European Union –also known as Brexit– is a major source of concern. This article seeks to assess the costs of uncertainty over Brexit by delving into the impacts of the attention given to this event (via Google Trends and Twitter) on UK, German and French equities, while controlling for the effects of global financial and economic factors. We use different econometric tools enable to measure the strength of Brexit’ effect as alternative to tail distributions (quantile regression approach) and spectral components (frequency domain causality test). Despite a heaviest awareness that it is difficult to properly quantify the costs of uncertainty over Brexit, this study provides evidence that the severity of Brexit’ impact was not uniform across the investigated equities. Germany suffered most if the British exit from Europe happens, followed by France and UK. These results are fairly robust among the different methods and the internet proxies used.

Suggested Citation

  • Bouoiyour, Jamal & Selmi, Refk, 2016. "Is uncertainty over Brexit damaging the UK and European equities?," MPRA Paper 70520, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:70520
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    File URL: https://mpra.ub.uni-muenchen.de/70520/3/MPRA_paper_70520.PDF
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    References listed on IDEAS

    as
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    3. Hood, Matthew & Malik, Farooq, 2013. "Is gold the best hedge and a safe haven under changing stock market volatility?," Review of Financial Economics, Elsevier, vol. 22(2), pages 47-52.
    4. Balcilar, Mehmet & Demirer, Rıza & Hammoudeh, Shawkat, 2014. "What drives herding in oil-rich, developing stock markets? Relative roles of own volatility and global factors," The North American Journal of Economics and Finance, Elsevier, vol. 29(C), pages 418-440.
    5. Roger Koenker & Zhijie Xiao, 2002. "Inference on the Quantile Regression Process," Econometrica, Econometric Society, vol. 70(4), pages 1583-1612, July.
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    Cited by:

    1. Tihana Škrinjarić, 2019. "Stock Market Reactions to Brexit: Case of Selected CEE and SEE Stock Markets," IJFS, MDPI, vol. 7(1), pages 1-14, January.

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    More about this item

    Keywords

    Brexit; uncertainty; social media; equities; UK; Europe.;
    All these keywords.

    JEL classification:

    • G0 - Financial Economics - - General
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

    NEP fields

    This paper has been announced in the following NEP Reports:

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