Political Uncertainty on the UK Real Estate market, evidence from the Brexit referendum run-up

Abstract: Uncertainty on the political front, has in recent years been a major cause to impediment in investment and growth. In contrast to other core asset classes, like equities and bonds, the effects of political risks and uncertainty on the real estate market remain unexplored. This thesis aims to fill this gap, by studying the link between political uncertainty derived from opinion polls on publicly traded real estate firms listed on the London Stock Exchange, in the Brexit referendum run-up. Using cross-sectional regression for polls published between January 2013 and June 2016, we find evidence that the share of leaving votes had a significant relationship with returns on the real estate market, observing large negative abnormal returns relative to the market when the share of leave votes increased in our sample. The results can be used by decision makers to understand the property stock market in connection to political events.