Impact of Great Britian's referendum to exit from the European Union on the stock and foreign exchange markets of Cambodia, Indonesia, Philippines and Vietnam

• Main Authors: Adina, Katharine M., Geron, Cedrick Neil V., Gondra, Aldous Leroy V., Mojica, John Michael G.
• Format: text
• Language: English
• Published: Animo Repository 2017
• Subjects: Foreign exchange rates > Southeast Asia
• Online Access: https://animorepository.dlsu.edu.ph/etd_bachelors/7763
• Institution: De La Salle University

The study is focused on the effect of the decision of Great Britain to exit from the European Union on four ASEAN countries Cambodia, Indonesia, Philippines, and Vietnam. Specifically, the aim is to identify if there was a change in the volatility of the exchange rates and the prices of different indices in the said countries. This paper presented the ARCH/GARCH model to determine if there was significant volatility clustering after the announcement of the decision of Great Britain to leave the European Union. Furthermore, the researchers used the change in the index level of each country as the dependent variable, while using the event window as the independent variable. In determining the impact on the volatility of the currency pairs, the researchers used the GARCH (1,1) model. The model produced mixed results when it came to the coefficient of the ARCH and GARCH. The 90-day period before the event has a different ARCH/GARCH coefficient than the 90 days ARCH/GARCH coefficient after the announcement, and this is true to all the specified countries. In terms of the stock market, we accepted the null hypothesis and we concluded that the Brexit referendum had no significant impact to the volatility of all the stock markets (Philippine stock market, Cambodian stock market, Indonesian stock market, and Vietnamese stock market). Similarly, for the foreign exchange markets, the results showed that there is no significant impact to the volatility of all the foreign exchange currencies (PHP/GBP, VND, GBP, IDR/GBP, and KHR/GBP).