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Political uncertainty and sentiment: Evidence from the impact of Brexit on financial markets
Journal article   Peer reviewed

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

Robert Hudson, Andrew Urquhart and Hanxiong Zhang
European economic review, Vol.129, p.103523
10/2020

Abstract

Investor sentiment Risk Market efficiency Event study EU referendum
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.

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