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  • Topic: Event Study (2) : Seminar 2 (Week 3)

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    This document provides questions to guide discussion of a study that examines the UK stock market's reaction to Brexit process events between 2016 and 2019. The study uses an event study methodology to calculate abnormal stock returns around key Brexit dates. It finds that events increasing the likelihood of Brexit typically caused negative market reactions, while events reducing Brexit uncertainty saw positive returns. The study also conducts cross-sectional regressions to analyze how different firm characteristics relate to the magnitude of stock price changes in response to Brexit news.

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    This document provides questions to guide discussion of a study that examines the UK stock market's reaction to Brexit process events between 2016 and 2019. The study uses an event study methodology to calculate abnormal stock returns around key Brexit dates. It finds that events increasing the likelihood of Brexit typically caused negative market reactions, while events reducing Brexit uncertainty saw positive returns. The study also conducts cross-sectional regressions to analyze how different firm characteristics relate to the magnitude of stock price changes in response to Brexit news.

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    6 views2 pages

    Topic: Event Study (2) : Seminar 2 (Week 3)

    Uploaded by

    patrickmuchiri2024
    This document provides questions to guide discussion of a study that examines the UK stock market's reaction to Brexit process events between 2016 and 2019. The study uses an event study methodology to calculate abnormal stock returns around key Brexit dates. It finds that events increasing the likelihood of Brexit typically caused negative market reactions, while events reducing Brexit uncertainty saw positive returns. The study also conducts cross-sectional regressions to analyze how different firm characteristics relate to the magnitude of stock price changes in response to Brexit news.

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    of 2

    MN-3501 Financial Economics

    Seminar 2 (week 3)

    Topic: Event Study (2)


    Read the paper Shahzad et al. (2019): < UK’s stock market reaction to Brexit
    process: A tale of two halves>, Economics Modelling

    (1) What events are taken into account in this study?

    (2) According to Table 1 (see page 276), when an event increases the
    likelihood of Brexit and favourable trading deal with EU, the authors
    expect a negative market reaction. Do you agree with this expectation?
    In which circumstances would you expect market to react these events
    positively?

    (3) How market reaction (abnormal return) is calculated in this study


    (see section 2.3.1 in page 280)?

    (4) Explain the market reactions to Brexit process events (Part of Table 5
    in page 278). Which event triggered the most significant market
    reaction?
    (5) Explain the cross-section regression model in formula (1) (see
    page 281)

    (6) Explain the cross-section results in table 6 (see page 279)

    (7) Does this study’s finding support efficient market


    hypothesis (EMH) or not?

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