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The Heterogeneous Impact of Brexit: Early Indications from the FTSE

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  • Ronald B. Davies
  • Zuzanna Studnicka

Abstract

The UK’s decision to leave the EU is surrounded by several studies simulating its potential effects. Alternatively, we examine expectations embodied in stock returns using a two-part estimation process. While most firms’ prices fell, there was considerable heterogeneity in their relative changes. We show that this heterogeneity can be explained by the firm’s global value chain, with heavily European firms doing relatively worse. For firms with few imported intermediates, this was partially offset by a greater Sterling depreciation. These changes were primarily in the first two days and highly persistent. Understanding these movements gives a better understanding Brexit’s potential effects.

Suggested Citation

  • Ronald B. Davies & Zuzanna Studnicka, 2017. "The Heterogeneous Impact of Brexit: Early Indications from the FTSE," CESifo Working Paper Series 6478, CESifo Group Munich.
  • Handle: RePEc:ces:ceswps:_6478
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    Cited by:

    1. Breinlich, Holger & Leromain, Elsa & Novy, Dennis & Sampson, Thomas & Usman, Ahmed, 2018. "The Economic Effects of Brexit - Evidence from the Stock Market," CEPR Discussion Papers 13147, C.E.P.R. Discussion Papers.
    2. Samir Kadiric & Arthur Korus, 2018. "Effects of Brexit on Corporate Yield Spreads: Evidence from UK and Eurozone Corporate Bond Markets," EIIW Discussion paper disbei251, Universitätsbibliothek Wuppertal, University Library.
    3. Blank, Sven & Egger, Peter H. & Merlo, Valeria & Wamser, Georg, 2018. "A structural quantitative analysis of services trade de-liberalization," Discussion Papers 47/2018, Deutsche Bundesbank.

    More about this item

    Keywords

    global value chain; event study; Brexit;

    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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