The Global Impact of Brexit Uncertainty

Hassan, Tarek A.; Hollander, Stephan; Lent, Laurence van; Tahoun, Ahmed

doi:10.2139/ssrn.3501910

Cited by 4 publications

(3 citation statements)

References 28 publications

(39 reference statements)

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“…To quantify exposure to climate change, we build on Hassan et al (2019Hassan et al ( , 2021Hassan et al ( , 2023a. Extracting climate-related information from text sources is challenging (Webersinke et al ( 2021)).…”

Section: A Discovery Of Climate Change Bigramsmentioning

confidence: 99%

“…A benefit of these measures is that they reflect "soft" information originating from information exchanges between managers and analysts. 1 To construct the climate change exposure measures, we build on recent work using quarterly earnings calls as a source for identifying firms' various risks and opportunities (Hassan et al (2019(Hassan et al ( , 2021(Hassan et al ( , 2023a(Hassan et al ( , 2023b, Jamilov, Rey, and Tahoun (2021)). These studies use the proportion of the conversation during an earnings call that relates to a particular topic to capture the firm's exposure to that topic.…”

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confidence: 99%

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Firm‐Level Climate Change Exposure

Sautner¹,

Lent²,

Vilkov³

et al. 2023

The Journal of Finance

317

134

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We develop a method that identifies the attention paid by earnings call participants to firms' climate change exposures. The method adapts a machine learning keyword discovery algorithm and captures exposures related to opportunity, physical, and regulatory shocks associated with climate change. The measures are available for more than 10,000 firms from 34 countries between 2002 and 2020. We show that the measures are useful in predicting important real outcomes related to the net-zero transition, in particular, job creation in disruptive green technologies and green patenting, and that they contain information that is priced in options and equity markets. CLIMATE CHANGE WILL PROFOUNDLY AFFECT the way business is conducted. Scientists have developed complex models that estimate the effect of greenhouse gas emissions on the global climate. At the same time, however, little

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Section: A Discovery Of Climate Change Bigramsmentioning

confidence: 99%

mentioning

confidence: 99%

Firm‐Level Climate Change Exposure

Sautner¹,

Lent²,

Vilkov³

et al. 2023

The Journal of Finance

317

134

View full text Add to dashboard Cite

show abstract

“…As regards to measures of Brexit uncertainty, there are several approaches. For example, Hassan et al (2020) propose a general text-based method using natural language processing to estimate the impact of Brexit related uncertainty, while Graziano et al (2018) identify monthly variation in exports; Graziano et al (2020) use a prediction market-based variable. Bloom et al (2018) use the Decision Maker Panel in August 2016, a representative business survey which collects information on many different aspects of uncertainty, while Steinberg (2017) investigates the impact of higher trade costs following Brexit implementing a dynamic model.…”

Section: Introductionmentioning

confidence: 99%

To be or not to be in the EU: the international economic effects of Brexit uncertainty

Makrychoriti

Spyrou

2022

The European Journal of Finance

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This paper evaluates the impact of Brexit-related uncertainty on the economies of the UK, EU, and the US. We propose a measure of Brexit uncertainty that has not been employed before in the literature. We first construct a binary variable by selecting Brexit-related events. We subsequently employ the Qual VAR model of Dueker (2005) to transform this variable to a continuous latent variable that captures uncertainty on important economic and financial variables. Next, this latent variable enters a structural Factor-Augmented Vector AutoRegression model combined with 452 macro and financial variables for the sample countries. Overall, our results indicate that the prolonged period of uncertainty, had a positive effect on the economies of major EU countries and negative effects for the UK economy. Additionally, UK is the most important net sender of uncertainty spillovers in the EU, while Germany and France are among the most important net receivers of uncertainty shocks.

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Market expectation shifts in option-implied volatilities in the US and UK stock markets during the Brexit vote

Bielykh

Pysarenko

Ren

et al. 2021

Investment Management and Financial Innovations

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This paper investigates the effect of the Brexit vote on the connection between UK stock market expectations and US stock market returns. To gauge UK stock market expectations, the option-implied volatilities of the FTSE 100 index are calculated in the period starting five months before and ending four months after the Brexit referendum. To keep the analysis “clean”, it stops right before the 2016 US presidential elections. It uses an OLS regression to estimate the change in the relationship between US and UK stock market expectations.The main findings show that the US and UK stock markets became somewhat less integrated four months after the Brexit referendum compared to the five months before it. The S&amp;P 500 Index returns have a statistically significant impact on implied volatilities of the FTSE 100 only before the Brexit referendum. However, the British risk-free rate (LIBOR) became a statistically significant factor affecting FTSE 100 implied volatilities only after Brexit. This analysis may be used by decision-makers in the money management industry to act appropriately during Black Swan events. When UK citizens unexpectedly voted in favor of Brexit, the risk-free rate dropped, making it cheaper to invest, increasing the Sharpe ratios of equity portfolios. Coupled with increased uncertainty, this caused portfolio reallocations. In turn, expected volatility measured by options-implied volatility increased. AcknowledgmentThe authors would like to thank Olesia Verchenko for critique, a KSE M.A., external defense reviewer for helpful comments.

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The Global Impact of Brexit Uncertainty

Cited by 4 publications

References 28 publications

Firm‐Level Climate Change Exposure

Firm‐Level Climate Change Exposure

To be or not to be in the EU: the international economic effects of Brexit uncertainty

Market expectation shifts in option-implied volatilities in the US and UK stock markets during the Brexit vote

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