We examined the perceived risk of Brexit Referendum (BR) in the United Kingdom (UK) securitization market, using 1,021 securitized bonds issued between 2011 and 2018. We find an unexpected negative relationship between the BR outcome and the initial yield spreads of asset-backed securities (ABS), even after accounting for the downward-adjusted credit ratings in the post-BR period. We do not observe this effect for mortgage-backed securities (MBS). Our findings imply that investors diversified into ABS bonds under uncertainty in the post-BR period.
|Journal||Applied Economics Letters|
|Publication status||Accepted/In press - 16 Jul 2020|