Amid the sound and fury surrounding our nominal departure from the European Union (EU), you would think that finance markets would provide a steer on the likely shape of our future trading arrangements, but the evidence is far from conclusive. Every oscillation of sterling, every bond yield increment is tied in to Brexit by the financial press, but asset pricing is predicated on the relationship between systematic risk and expected returns – and drawing assumptions on either is problematic given the ongoing political wrangling. Without clarity on this score, it’s hard to believe there aren’t some mispriced assets out there, even if you’re an advocate of the efficient market hypothesis.
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