Abstract

Great Britain is a significant financial centre in the world and its stock market has the major share of the world stock market. Changes at this market can largely influence investor behaviour, in particular as a result of the increased risk arising from the current situation. Higher risks at the stock market are reflected in the aggregate – the rise in price volatility, as well as lower liquidity of the market. The term “country risk” is currently associated with not only emerging markets but also advanced ones. Whereas in the past economic research has focused mainly on credit risk, or country insolvency at the sovereign bond market, country risk studies are currently also targeting stock markets where the investor may encounter even higher risk. The purpose of this paper is to examine the sensitivity of the stock market movement to the UK’s political risks linked to the Brexit, which may have consequences not only for the country, but for the whole of Europe. This fact must be considered by every investor when deciding about investment allocation into this country. At the same time, we will try to look at possible changes at the UK stock market from the outlook for the Industry 4.0, which in turn can positively influence the stock market. The results of analysis of stock indexes volatility FTSE100, DAX30 і S&P500 during the 2015-2017 years showed that political decisions on Brexit didn’t had significant impact on the negative developing tendency of the stock market. In the paper, the authors proved the impact of the sectorial structure and export policy on the Country Risk and possibilities its changes as a result of the Industry 4.0 implementation. The issue of the future is debatable, where the decisive idea of a new industrial revolution and the need for a change in sectoral structures will also be reflected in the structure of stock markets.  

Keywords: country risk, economic risk, political risk, financial risk, volatility of stock market, risk spread, Great Britain, Brexit.

JEL Classification: G11, G12, G15.

Cite as: Chovancova, B., & Slobodnik, P. (2018). The impact of Brexit on country risk of Great Britain in investing at stock market. Marketing and Management of Innovations, 2, 23-30. https://doi.org/10.21272/mmi.2018.2-02

This work is licensed under a Creative Commons Attribution 4.0 International License

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