How Brexit affects the causal relationships between the UK and fourteen other developed countries in the European Union?

The goal of this research is to investigate the causal relationships among the Small-Cap stock market behaviors of the UK and the other fourteen developed countries in the European Union before and after the UK European Union membership referendum. The Granger causality test is used in this study via a leveraged bootstrap test developed by Hacker and Hatemi-J to examine the causalities. The data results show that six causalities are found before the referendum and the number of the causalities decrease to only three after the referendum. It suggested that the UK Small-Cap market is less affected and has less influence on the movement of the other fourteen developed countries in the European Union. This finding provides another aspect of the UK European Union membership referendum for the investor to take into consideration while building an investment portfolio. [ABSTRACT FROM AUTHOR]