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Fog in the Channel? How have equity markets reacted to Brexit news?

Srdan Tatomir, Iryna Kaminska, Marek Raczko and Gregory Thwaites

How have equity markets responded to news about Brexit? To answer this we split firms into those whose share prices are particularly sensitive to Brexit-related news, and those which are not.  The latter group provides a “control sample”, against which to assess the impact of individual pieces of news on the former. The ratio of the two groups’ prices gives a barometer of equity market sentiments around Brexit. So far, this measure points to downward pressure on valuation of companies more exposed to Brexit. The bulk of the fall occurred on the night of the referendum, with little movement afterwards, suggesting little additional “news” from subsequent developments beyond the immediate aftermath.

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