New research from the University of Surrey has found that the political and economic chaos triggered by the 2016 Brexit vote sent 'financial shockwaves' across Europe, exposing the tight financial ties between developed economies.
Analysing over two decades of stock market data from EU countries, researchers discovered that Brexit-related events 'significantly increased volatility spillovers between European markets'. The study, published in the International Journal of Finance & Economics, tracked around 500 political and economic events during the Brexit process.
Lead author Dr Vasileios Pappas said: 'Brexit was a long series of political shocks that financial markets here in the UK and across the continent had to absorb in real time. Each major announcement or political shift sent signals through European markets, spreading uncertainty far beyond the UK.'
The research found that larger markets, such as Paris and London, tended to transfer volatility to smaller ones, with France emerging as the most persistent transmitter of volatility during the Brexit period. Smaller markets in Ireland, Portugal and Spain were most affected.
Interestingly, the study also revealed that Brexit weakened financial integration within Europe, as markets began reacting more independently amid heightened political uncertainty.
