The impact of the catalan referendum on stock markets

Abstract

This paper focuses on the European markets reaction to the referendum that took place on October 1st, 2017 in Catalonia in order to determine whether the Catalan population wanted it to be independent from Spain. This announcement was declared as illegal by the Central Government though did not block the separatist party to organize it. As a result, the majority of the Catalans that decided to participate voted in favor to an independent Catalonia but the participation rate did not reach half of the citizens. Using the event study methodology, we determine the effect of this referendum on stock markets such as Spain, France, Germany, Belgium and United Kingdom with S&P Europe350 as a market proxy. Our findings confirm the most significant negative impact on the Spanish Market two days after the referendum (on October 4th) then the market seems to quickly recover and generate positive abnormal returns in the post-event period. However, the rest of Europe shows ignorance for this event.