Volatility spillovers across European stock markets under the uncertainty of Brexit

This paper examines the behaviour of some inter-related European stock markets under the uncertainty of Brexit in a multivariate time-varying setting. Our results point to considerable interactions between these markets. As evident by the smaller and less frequent positive net total volatility spillovers, the UK's influence on the other markets has been decreasing since the campaign for the EU referendum started in January 2016. Although the shock of the Brexit decision on 23rd June 2016 increases market volatility as expected, it exerts diverse impacts instantaneously on market co-movements. Although the ambivalent markets adjust rather quickly, synchronising their movements within days, the impact of the Brexit decision on market co-volatility continues to be substantial and persists. Impact of the yet-progress-made trade agreement now under negotiation for resolution may as well be long lasting on the dynamics between markets.