A Storm But No Damage? A Two-Country Equity and Currency Market Perspective of Brexit

31 Pages Posted: 20 Mar 2018

See all articles by Dirk G. Baur

Dirk G. Baur

University of Western Australia - Business School; Financial Research Network (FIRN)

Thomas Dimpfl

University of Tuebingen - Department of Statistics and Econometrics

Sirimon Treepongkaruna

The University of Western Australia; Financial Research Network (FIRN)

Date Written: March 20, 2018

Abstract

This paper analyses the impact of the June 23, 2016 Brexit vote on the British and Australian currency and equity markets. The two markets are particularly interesting as they were both strongly impacted by the Brexit vote, have cross-listed stocks and non-overlapping trading hours. Whilst the currency changes were immediate in both countries due to continuous 24-hour trading, the equity market effects occurred sequentially, led by the ASX and followed by the LSE. The analysis demonstrates that equity markets (in contrast to the currency markets) overreacted to the Brexit vote as the initial market reaction was fully corrected within five trading days. More importantly perhaps, the findings also indicate that non-synchronous trading can distort and delay price adjustments.

Keywords: Brexit, Cross-Listing, Price Discovery, Volatility, High-Frequency Data, Contagion

JEL Classification: F21, F23, G01, G12, G13, G14

Suggested Citation

Baur, Dirk G. and Dimpfl, Thomas and Treepongkaruna, Sirimon, A Storm But No Damage? A Two-Country Equity and Currency Market Perspective of Brexit (March 20, 2018). Available at SSRN: https://ssrn.com/abstract=3144270 or http://dx.doi.org/10.2139/ssrn.3144270

Dirk G. Baur (Contact Author)

University of Western Australia - Business School ( email )

School of Business
35 Stirling Highway
Crawley, Western Australia 6009
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Thomas Dimpfl

University of Tuebingen - Department of Statistics and Econometrics ( email )

Germany

Sirimon Treepongkaruna

The University of Western Australia ( email )

35 Stirling Highway
Crawley, Western Australia 6009
Australia
+61864887853 (Phone)
+61864881086 (Fax)

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

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