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Int. J. Financial Stud. 2018, 6(1), 21; doi:10.3390/ijfs6010021

Brexit and Uncertainty in Financial Markets

1
Department of Economics and Finance, Brunel University, London UB8 3PH, UK
2
Department of Economics, University of Navarra, UB8 3PH Pamplona, Spain
*
Author to whom correspondence should be addressed.
Received: 22 January 2018 / Revised: 6 February 2018 / Accepted: 8 February 2018 / Published: 11 February 2018
(This article belongs to the Special Issue Impact of Brexit on Financial Markets)
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Abstract

This paper applies long-memory techniques (both parametric and semi-parametric) to examine whether Brexit has led to any significant changes in the degree of persistence of the FTSE (Financial Times Stock Index) 100 Implied Volatility Index (IVI) and of the British pound’s implied volatilities (IVs) vis-à-vis the main currencies traded in the FOREX (foreign exchange market), namely the euro, the US dollar and the Japanese yen. We split the sample to compare the stochastic properties of the series under investigation before and after the Brexit referendum, and find an increase in the degree of persistence in all cases except for the British pound-yen IV, whose persistence has declined after Brexit. These findings highlight the importance of completing swiftly the negotiations with the European Union (EU) to achieve an appropriate Brexit deal. View Full-Text
Keywords: Brexit; uncertainty; IVI index; British pound’s implied volatilities; financial markets Brexit; uncertainty; IVI index; British pound’s implied volatilities; financial markets
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This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited. (CC BY 4.0).

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MDPI and ACS Style

Caporale, G.M.; Gil-Alana, L.; Trani, T. Brexit and Uncertainty in Financial Markets. Int. J. Financial Stud. 2018, 6, 21.

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