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ON VALUATION
The Brexit result fell on a quarter day, raising the question of how to value on that date
In 2008, Lehman Brothers came under pressure due to the sub-prime mortgage crisis. In the first half of the year, Lehman's stock lost 73% of its value. The shares plunged by 45% on 9 September. On 10 September a further 7% was lost. On 15 September Lehman Brothers filed for chapter 11 bankruptcy protection.
Brexit
Like the 2008 financial crisis, the Brexit vote was a long time in coming. The bill directing a referendum on the UK's membership of the European Union was introduced in the House of Commons in May 2015. On 7 September it completed its passage through the Commons. Having passed through the Lords, the bill received Royal Assent on 17 December 2015.
Opinion polling between May 2014 and June 2015 suggested that 60% of participants had consistently said they would vote in favour of staying in the EU. However, by December 2015 the same polling organisation was reporting 42% in favour and 41% against.
Friday 24 June 2016 was remarkable for two reasons. First, the country awoke to a referendum result that ran contrary to positions widely taken in the financial markets just a few hours before. Second, all this happened on a quarter day. Thoughts turn to valuation.
How to value?
How do you value in a time of turmoil? Let's break that down into two questions.
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