Analysis of CAPM Beta Coefficients for Three FTSE 100 Companies Before and After the Brexit Vote

Your coursework needs to be submitted electronically to Moodle. See your Student Handbook (on Moodle) for further details of this process. The deadline for coursework submission is 3pm on Monday, 2nd December. Late submission will attract a mark penalty unless an extension has been approved (see your Student Handbook on Moodle for details). You should write your assignment on the topic set out below (1,500 words).

• Topic: 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 100 companies of your choice (each from a different industry, e.g. utilities, banking, retail etc) over the period June 23, 2014 to June 22, 2018. Make sure you use daily stock price and daily returns in your calculations.

As a reference for Beta calculations, you may generally follow Gardner et al (2010) methodology (please see below). However, please note that Gardner et al use monthly stock returns while we would like to use daily stock returns for our purposes.   

Part B. Split the sample into the pre-Brexit vote period (June 23, 2014 to June 22, 2016) and the post-Brexit vote period (June 24, 2016 to June 22, 2018) 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 values of the Beta coefficients have 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.

UG Coursework Submission Requirements: A maximum word count will be set by the module convenor and must be adhered to. The penalty for exceeding this limit is a five mark deduction.

The actual word count of the assignment must be stated by the student on the first page (cover sheet) of the assignment.

The overall word count does include citations and quotations.

The overall word count does not include the references or bibliography at the end of the coursework.

The word count does not include figures and tables.

Appendices may or may not be included in the word count as specified by the Module Convenor. For this module the following applies:

Appendices are not included in the overall word count. 

Students should prepare and submit their coursework assessments in the following format:

UG Coursework Submission Requirements

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These guidelines are intended to help you prepare a good assignment for the module.  Please read through these notes before starting your coursework and also before handing it in.

1. Research the chosen topic. A good way to start is by looking at what the recommended readings have to say on the topic. After that, you use them to identify other relevant literature and chase that up; you should also make use of the internet and the library electronic collection of journals. It is often also a good idea to identify the key writers on any particular issue, and then chase up more of their work (e.g., using web searches or visiting their websites).

2. Plan how you are going to address the subject, working out what the issues are, and taking account of what is referred to in the lectures, lecture notes and seminars.

3. Allow yourself sufficient time to prepare your coursework.

4. Search for relevant material, using what is mentioned in lectures, lecture notes, and seminars, but also look for material on the web and using the library (particularly journals available electronically).

5. Organise your thoughts so that you know what arguments you are going to use.

6. Your assignment should contain an introduction and a conclusion, but with your main arguments in the middle.

7. Don’t have a long introduction – there is no need for lengthy definitions of basic material – but ensure the introduction contains a plan of the assignment. This not only helps the reader follow it, but also helps ensure you stick to your plan!

8. In the middle of the assignment, present your arguments together with supporting evidence. Where applicable, consider the arguments both for and against a proposition. It helps to use evidence from a variety of sources.

9. Consider each paragraph you write. Consider whether the first sentence is a suitable introduction to what you are saying in that paragraph. Check that the paragraph is adding something relevant and valuable. Don’t be long-winded: really good essays get to the point quickly and pack a lot in.

10. In your conclusion draw on the key points you have made. Generally, it is best not to start introducing new material at this stage. However, try to show some interesting perspective if you can.

11. Make sure that you give your own answer and conclusion to the question, not someone else’s (for example, ‘Brown (1997) therefore concluded that insurers …’ is not your answer to the question).

12. List in the bibliographical references allthe material you have referred to in the assignment, from whatever source, including web-based materials. Present these references in the Harvard style (if you are not sure what this means, ask for help).  Do not include in the references material you have not referred to. You must also ensure that if you quote directly from any source material you indicate this by the use of quotation marks (‘…’) in addition to including an appropriate reference in both the main body of your answer and the bibliography.  If you fail to do this you risk facing a plagiarism investigation, which can have very serious consequences – see the Postgraduate Handbook.

13. Use the spellchecker but also read through the assignment for any errors.