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The economic effects of Brexit - evidence from the stock market

Breinlich, Holger, Leromain, Elsa, Novy, Dennis, Sampson, Thomas and Usman, Ahmed (2018) The economic effects of Brexit - evidence from the stock market. Fiscal Studies. ISSN 0143-5671

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Identification Number: 10.1111/1475-5890.12175


We study stock market reactions to the Brexit referendum on 23 June 2016 in order to assess investors' expectations about the effects of leaving the European Union on the UK economy. Our results suggest that initial stock price movements were driven by fears of a cyclical downturn and by the sterling depreciation following the referendum. We also find tentative evidence that market reactions to two subsequent speeches by Theresa May (her Conservative Party conference and Lancaster House speeches) were more closely correlated with potential changes to tariffs and non-tariff barriers on UK-EU trade, indicating that investors may have updated their expectations in light of the possibility of a `hard Brexit'. We do not find a correlation between the share of EU migrants in different industries and stock market returns.

Item Type: Article
Official URL:
Additional Information: © 2018 Institute for Fiscal Studies
Divisions: Economics
Subjects: H Social Sciences > HC Economic History and Conditions
H Social Sciences > HG Finance
J Political Science > JN Political institutions (Europe) > JN101 Great Britain
JEL classification: F - International Economics > F1 - Trade > F15 - Economic Integration
F - International Economics > F2 - International Factor Movements and International Business > F22 - International Migration
G - Financial Economics > G1 - General Financial Markets > G14 - Information and Market Efficiency; Event Studies
Date Deposited: 13 Sep 2018 10:29
Last Modified: 09 Apr 2024 01:36
Projects: ES/R001804/1
Funders: Economic and Social Research Council

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