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— Topic 1: The effect of the Brexit vote on the CAPM Betas.

You should write your assignment on one of the topics set out below (1,500 words).

 

—   Topic 1: The effect of the Brexit vote on the CAPM Betas.

Part A. Using publicly available sources of stock price data and applying appropriate regression analysis, estimate the CAPM Beta coefficients for three FTSE 350 companies of your choice (each from a different industry, e.g. utilities, banking, retail etc) over the most recent five-year period. Make sure you follow Gardner et al (2010) methodology (please see below).

Part B. Split the sample into the pre-Brexit vote period and the post-Brexit vote period and repeat the analysis for the two periods. For each of the three firms, calculate the pre-Brexit CAPM Beta and the post-Brexit CAPM Beta.

Part C. Comment on your results. Do you have empirical evidence to suggest that the value of the Beta coefficients has changed as a result of the Brexit vote? If yes, which firms/industries are affected the most? Why? Discuss your results with reference to the strengths and limitations of CAPM.

 

 


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