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Did Brexit change the behaviour of the UK’s financial markets?

Author

Listed:
  • Bachar FAKHRY

    (University of Lahore, School of Accountancy & Finance,Lahore, Pakistan)

Abstract

The recent UK referendum results and subsequent initiation of Article 50 in the 2007 Lisbon Treaty setin motion the UK’s withdrawal from the European Union, acknowledge as Brexit. The result and subsequent action were unprecedented and for many unforeseeable. Apart from the political instability and division of the country, the complicated and long process of Brexit have both economic and financial consequences. With this in mind, we analyse the impact of Brexit on four main British financial markets: Equity, Foreign Exchange, Gold and Sovereign Debt; using daily data. We extendthe variance bound test proposed by Fakhry & Richter (2018) underpinned by an asymmetrical C-GARCH-m model of volatility. Unlike many in the past, we placed the emphasis on the stable markets; thus introducing the stable marketpre-condition hypothesis.We analyse the long and short run effects of Brexit on the stability of the UK’s financial market. Our results hint at a certain impact on the UK’s financial market in both the long and short runs on the market stability and hence efficiency. This seems to be dictated by the reaction ofmarket participants to uncertainty surrounding the future of the UK

Suggested Citation

  • Bachar FAKHRY, 2019. "Did Brexit change the behaviour of the UK’s financial markets?," Journal of Economics and Political Economy, EconSciences Journals, vol. 6(2), pages 98-121, June.
    • Handle: RePEc:cvv:journ1:v:6:y:2019:i:1:p:98-121
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    References listed on IDEAS

    as
    1. Christian Rudolf RICHTER & Bachar FAKHRY, 2016. "Testing the Efficiency of the GIPS Sovereign Debt Markets using an Asymmetrical Volatility Test," Journal of Economics and Political Economy, EconSciences Journals, vol. 3(3), pages 524-535, September.
    2. Bachar Fakhry & Christian Richter, 2018. "Does the Federal Constitutional Court Ruling Mean the German Financial Market is Efficient?," European Journal of Business Science and Technology, Mendel University in Brno, Faculty of Business and Economics, vol. 4(2), pages 111-125.
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    Keywords

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    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • G01 - Financial Economics - - General - - - Financial Crises
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G40 - Financial Economics - - Behavioral Finance - - - General

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