Purpose − this study investigates the stock market co-movements among three countries to observe the
contagion which can be increased during Brexit.
Research methodology – Wavelet method used in this study to illustrate exciting dynamics of the coherence between
the UK, German and Hungarian stock markets since 2012.
Findings – the results show that the connection of the Budapest Stock Exchange and London Stock Exchange Market
Indices is increasing recently. The coherence between DAX and FTSE appears to be very high lately. This supports the
idea that may affect Hungarian markets.
Research limitations – because of the nonstationary of the time series such as stock exchange market data, it is essential
to have a measure of correlation or coherence such as wavelet. The days on which both markets were open could be
used to see the co-movements better.
Practical implications – this paper aims to show if there is a particular sign for a co-movement between markets and
therefore warns the investors about a dramatic change which might appear after Brexit. After the decision of Brexit,
investors in many markets do not know what their future position should be. Although it is still unknown how FTSE
will react when Britain leaves the EU, as a major country of the Union it may create some sanctions. These sanctions
may harm many stock markets as it may create new fluctuations.
Originality/Value – this study used a technique called wavelet to search the possible effects of Brexit in an Eastern
economy. The novelty of this paper is coming from the application of the wavelet method by using financial market
data, that enables us to understand the relations among stock markets during no crisis time. Because many studies focus
on big markets in Europe such as British, German and French stock markets, the main contribution of this study fills the
gap in the literature on the effects of Brexit in an Eastern Europe Economy
Power-law behaviour evaluation from foreign exchange market data using a wavelet transform method
