Brexit Uncertainty IVI index British pound’s implied volatilities Financial markets
This article is an open access
article distributed under the terms and conditions of the Creative Commons Attribution
(CC BY) license (http://creativecommons.org/licenses/by/4.0/).
Caporale, G.M. (Guglielmo M.); Gil-Alana, L.A. (Luis A.); Trani, T. (Tommaso). "Brexit and uncertainty in financial markets". International journal of financial studies. 6 (1), 2018, 21 - 29
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.