The Brexit vote and currency markets

Dao, T.M. ORCID: 0000-0002-1926-495X, McGroarty, F. and Urquhart, A., 2018. The Brexit vote and currency markets. Journal of International Financial Markets, Institutions and Money. ISSN 1042-4431

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Abstract

This paper studies the effect of the Brexit vote on the intraday correlation and volatility transmission among major currencies. We find that the vote causes an increase in the correlation among the safe-haven currencies of the Swiss franc and Japanese yen as well as gold, and also find a decrease in their correlation with the directly involved currencies of British sterling and the Euro. These changes are due to the appreciation of the former group and the depreciation of the latter group which represents a flight to quality of investors. We also observe a substantial decrease in volatility transmission between British sterling and the Euro following the Brexit vote due to lower levels of market integration. However the volatility transmission among the currencies has increased in general and their net spillover is positively correlated with their level of volatility and trading activities. Therefore we document the significant impact of the politically important Brexit vote on the high frequency correlation and volatility spillover in the foreign exchange market.

Item Type: Journal article
Publication Title: Journal of International Financial Markets, Institutions and Money
Creators: Dao, T.M., McGroarty, F. and Urquhart, A.
Publisher: Elsevier
Date: 27 November 2018
ISSN: 1042-4431
Identifiers:
NumberType
10.1016/j.intfin.2018.11.004DOI
S1042443118301367Publisher Item Identifier
Divisions: Schools > Nottingham Business School
Depositing User: Linda Sullivan
Date Added: 15 Jan 2019 09:24
Last Modified: 26 Nov 2019 03:00
URI: http://irep.ntu.ac.uk/id/eprint/35553

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