The British Pound on Brexit night : a natural experiment of market efficiency and real-time predictability

Exploiting the near-experimental conditions provided by the British Pound market in US Dollars during the Brexit vote of June 23rd, 2016, we unearth a major challenge to the Efficient Market Hypothesis. With a single factor of prior polling information, we show that the Brexit result could have been predicted with high confidence under realistic conditions, knowing only the first 20 of all 382 local voting results. However, the market was severely delayed in reflecting this fundamental information. This collective failure indicates both generic inefficiency and a specific inertia/durable bias in the market similar to herding during bubbles.