I am doing about analysing the impact of Brexit on British stock market i.e. FTSE 100 and FTSE 250. I did run OLS for estimation window to find the market model for each company in FTSE 100 and FTSE 250. And then, I found the abnormal returns for each in the event window from day -7 to day 30 ( day 0 is 23/06/2016 - official date of referendum). After that, average abnormal return for each day in the event window and cumulative abnormal return (CAAR) for the whole period were computed. But the result I got was not as I expected, CAAR for both FTSE 100 and FTSE 250 are negative while in fact, there were a significant increase for both FTSE 100 and FTSE 250.
Does anyone know where is the problem in this case?
I thought the reason is that I calculated the abnormal return by using the market index. And the market index was impacted by Brexit too. So the result is not reliable because of the correlation. I am not sure.