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Political uncertainty and stock market volatility: new evidence from the 2014 Scottish Independence Referendum
Author(s) -
Darby Julia,
Roy Graeme
Publication year - 2019
Publication title -
scottish journal of political economy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.4
H-Index - 46
eISSN - 1467-9485
pISSN - 0036-9292
DOI - 10.1111/sjpe.12186
Subject(s) - referendum , economics , volatility (finance) , stock (firearms) , financial economics , stock market , autoregressive conditional heteroskedasticity , politics , stock market index , common stock , econometrics , political science , law , geography , context (archaeology) , archaeology
Abstract We investigate the impact of heightened political uncertainty in the run‐up to, and after, the 2014 Scottish independence referendum. The conditional volatilities of stock returns of our Scottish index and the FTSE all share index are characterised by the same GARCH parameters for a sample ending in late 2013, but this no longer holds when estimation extends closer to the referendum. The relative volatility of Scottish companies’ stock returns peaked when polls indicated the referendum result was ‘too close to call,’ fell back on the result, but rose again in the run‐up to publication of proposals for further devolution.