.jpg)
Please find attached a risk monitor paper published by Axioma, a risk modelling provider.
The paper investigates the result of the Brexit vote and how it precipitated dramatic changes in equity and currency risk, driven by higher volatility and substantial changes in correlation.
Main findings of the paper include:
- UK equity risk soared for w/c 27 June 2016, with short-horizon expected volatility for the FTSE 350 jumping by more than eight percentage points - a 67% leap from the low level of risk in early June.
- Among UK sectors, Financials experienced the biggest changes, with their capitalisation weight falling, while their contribution to overall FTSE 350 risk climbed--though this change has been brewing for a while.
- In contrast to the single-country UK model, the biggest driver of change for Europe was higher currency risk; other components of risk (style, industry, and stock-specific) rose after the Brexit vote as well.
