The contagion phenomena of the Brexit process on main stock markets

Abstract

This paper studies the impact of the Brexit process in the main global financial markets by investigating the effect of financial contagion between series of stock index returns. The importance of the United Kingdom, not only at the European level but also at the international level, is the main reason for developing this analysis. We study the response on global financial markets to the Brexit process during the period that covers January 1, 2016 to November 30, 2018. We apply joint tests of contagion where the contagion channels are the conditional correlation, the coskewness and the covolatility between the United Kingdom as a source of contagion and the remaining recipient markets. Our results reveal financial contagion on the main European and international economies consistent with the effect of the Brexit referendum results and the subsequent increasing uncertainty.

Impact of Brexit on Islamic stock markets: employing MGARCH-DCC and wavelet correlation analysis

“…Other recent studies Escribano and Íñiguez (2020) and Li (2020), also confirm the considerable interaction and interdependence amongst EU and UK stock markets after the Brexit referendum. Hence, from the implication perspective, they show that it is not beneficial for the investors to apply diversifications amongst those countries during periods Impact of Brexit on Islamic stock markets of turmoil such as Brexit.…”

News sentiment and international equity markets during BREXIT period: A textual and connectedness analysis

“…Large parts of the process have been dominated by strong uncertainty, from the outcome of the 2016 referendum to the complex deal‐making process and the rejection of potential deals by the British parliament. As the final negotiation outcome could result in anything between almost no changes and the loss of access to the European Single Market for UK‐based companies (Escribano & Íñiguez, 2021; Gottschalk, 2021; Ionescu et al, 2021) and vice versa, the valuation of companies operating in and out of the United Kingdom and the European Union has become inherently more difficult. People tend to choose e‐digital over other forms of communication, which enables them to rapidly acquire information.…”