Brexit: Short-term stock price effects and the impact of firm-level internationalization

We perform an event study analysis to determine short-term abnormal stock returns following the Brexit referendum. Moreover, we examine whether firm-level internationalization helps explaining abnormal returns. We find that stocks of firms with higher proportions of domestic sales realized more nega...

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Bibliographic Details
Published in:Finance research letters 2017-08, Vol.22, p.175-181
Main Authors: Oehler, Andreas, Horn, Matthias, Wendt, Stefan
Format: Article
Language:English
Subjects:
Brexit
Event study
International diversification
Internationalization
Stock price effect
Stock returns
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Summary:We perform an event study analysis to determine short-term abnormal stock returns following the Brexit referendum. Moreover, we examine whether firm-level internationalization helps explaining abnormal returns. We find that stocks of firms with higher proportions of domestic sales realized more negative abnormal returns than stocks of firms with more sales abroad, i.e., a higher degree of international diversification. While firm-level internationalization largely explains abnormal returns on the trading day after the referendum, it has no relevant pricing effect in the following days. The quick adjustment of stock prices to reflect firm-level internationalization indicates a high degree of market efficiency.
ISSN:1544-6123
1544-6131
DOI:10.1016/j.frl.2016.12.024