What is it about?

In early October 2017, a few days shocked Spain and Europe: the region of Catalonia held an unauthorised referendum on independence and the central government intervened violently in the region. In this article we discuss how the uncertainty generated in these days affected the Spanish stock market. We first identify the most turbulent days and quantify the impact on stock returns. Then, we look for differences in the performance of Catalan companies and those in the rest of Spain and, finally, we find some of the characteristics that explain why some companies were more affected than others after the failed independence attempt.

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Why is it important?

This article is a contribution to the analysis of political and social risk and its impact on the Catalan markets. It is the only article that deals with a failed attempt at independence and yet we show that the impact is equally significant statistically and economically, providing unique evidence of how investors discount in advance potential future scenarios, even the most dire.

Read the Original

This page is a summary of: Independence day: Political risk and cross‐sectional determinants of firm exposure after the Catalan crisis, International Journal of Finance & Economics, December 2020, Wiley, DOI: 10.1002/ijfe.2373.
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