The Effect of “Brexit” Uncertainty on The FTSE 100 Index and The UK Pound

We investigate the impact of uncertainty surrounding United Kingdom’s proposed departure from European Community (“Brexit”) on financial assets. conduct an event study around November 14th 2018 draft withdrawal agreement. Our motivation was that economic various political permutations persisted throughout negotiation period were both measurable and distinct. The probability each Brexit scenario discussed varied over discourse. Using opinion poll data we FTSE 100 UK Pound. found that, in accordance with existing academic evidence, asset prices discounted weighted probabilistic likely outcomes. observe, however, this not as immediate theory suggests. Interestingly, currency markets had greater sensitivity. conclusions have important implications for pricing country risk premia general Union particular. Key takeaways: 1) Asset slow to discount risk. 2) Currency sensitivity changes 3) Country can be impacted by perceived custom union.