UK's stock market reaction to Brexit process: A tale of two halves

Khurram Shahzad, Ghulame Rubbaniy*, M.A.P.E. Lensvelt, Tariq Bhatti

*Corresponding author for this work

Research output: Contribution to JournalArticleAcademicpeer-review


We examine the UK's stock market reaction to 27 events associated with the likelihood of Brexit. Though the overall market reactions to these events is negative, a dissection of these events into the pre and post Brexit referendum events unearth interesting facts. In particular, we find that the market reaction is negative and significant to the events leading up to and including the announcement of Brexit results. This negative reaction is not confined to the day of announcement of the outcome of Brexit referendum only rather it spans over the events that enhanced the likelihood of the Brexit in the pre-Brexit referendum period. However, our results show a positive market reaction to events that occurred after the Brexit referendum. These findings suggest that initially market reacted negatively to the Brexit; however, as the UK's future economic relations with EU started to take a shape, the market started to see the positive side of Brexit. Consistent with this notion, our cross-sectional analysis shows a positive market reaction for the firms that are engaged in foreign sales and that much of the negative market's reaction relates to the firms that openly stated the negative effect of Brexit on their operations. Finally, we do not find evidence of market reaction to UK firms depending on European labor force; however, we do find significantly positive stock market reaction to the firms involved more in international trade. An important caveat of our study is that our reported results are sensitive to the choice of market index.

Original languageEnglish
Pages (from-to)275-283
Number of pages9
JournalEconomic Modelling
Publication statusPublished - 1 Aug 2019


  • Brexit
  • Cross-sectional analysis
  • Market reaction


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