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Political uncertainty and sentiment: Evidence from the impact of Brexit on financial markets

Hudson, Robert; Urquhart, Andrew; Zhang, Hanxiong

Authors

Andrew Urquhart

Hanxiong Zhang



Abstract

This paper investigates whether the impact of Brexit on financial markets is consistent with rational asset pricing models using 34 financial indices. Our results indicate that, whilst Brexit events affect both the risk and returns of stocks, the returns on event days are largely justified by the risk and the risk premium on those days. Our results support the appropriateness of rational asset pricing models even in a period of such high political uncertainty and potentially raised sentiment.

Journal Article Type Article
Publication Date Oct 1, 2020
Journal European Economic Review
Print ISSN 0014-2921
Publisher Elsevier
Peer Reviewed Peer Reviewed
Volume 129
Article Number 103523
APA6 Citation Hudson, R., Urquhart, A., & Zhang, H. (2020). Political uncertainty and sentiment: Evidence from the impact of Brexit on financial markets. European Economic Review, 129, https://doi.org/10.1016/j.euroecorev.2020.103523
DOI https://doi.org/10.1016/j.euroecorev.2020.103523
Keywords Event study; EU referendum; Risk; Investor sentiment; Market efficiency
Publisher URL https://www.sciencedirect.com/science/article/abs/pii/S0014292120301549?via%3Dihub
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