Effects of Brexit Referendum and US Presidential Election 2016 on UK and European (ex UK) stock markets : an event study

Abstract

Brexit Referendum and US Presidential Election were the two most influential world events in the year 2016. Because of their unexpected results, stock markets around the world experienced lots of turbulences in their stock prices. Brexit Referendum mostly affected the European markets as the future of UK and rest of the Europe are dependent on the result of the event. US Presidential Election, on the other hand, was most likely to affect the US market. But USA has very close business and economic ties with European Union. So, the result of the event is also expected to affect the stock markets of Europe. This thesis has actually conducted an event study on these two events affecting the European markets. For the research, this study has divided the European market into two sub regions- UK and Europe excluding UK. This study found that the event of Brexit Referendum significantly affected the stocks returns on the second day of the event. But US Presidential Election 2016 did not significantly affect the stocks returns of both the regions. Markets seemed to recover and bounced back again within few days of the shocks. So, this could suggest an opportunity for stock investors to accumulate large capital gains.