Did Brexit change Asset Co-Movements?

Saha, Shrabani, Anindya, Sen, Smith-Han, Christine and Wesselbaum, Dennis (2020) Did Brexit change Asset Co-Movements? Journal of Financial Economic Policy . ISSN 1757-6385

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Item Type:Article
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Abstract

This article examines the impact of the Brexit referendum on the risk structure of financial asset prices. Co-movements are analysed using daily price returns of major stock and bond indices as well as commodities and exchange rates from June 2014 to June 2018. We employ a multivariate GARCH model to study the dynamics of the conditional correlation matrix of asset returns. We find that the conditional variances and correlations of assets spike on and after the Brexit referendum and then quickly revert to normal levels, suggesting that the effect of the referendum was transient rather than structural. Our findings are of interest to investors as co-movements of financial assets can significantly impact financial portfolios and hedging strategies.

Keywords:Brexit, Dynamic Conditional Correlations, Financial Markets
Divisions:Lincoln International Business School
ID Code:42974
Deposited On:13 Nov 2020 15:41

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