Professor urges investors to avoid panic after Brexit

(AGI) Rome, June 24 - The collapse of financial markets in response to Britain leaving the European Union means "we risk losing our rational response to investment choices and making mistakes that could weigh very heavily on financial portfolios," said Daniele Previtali, Market Economics Professor at Luiss University in Rome. "It is therefore essential to maintain a clear distinction between the price of a financial activity and its fundamental value. To take the example of shares, the price is the amount paid by someone to acquire a certain amount of shares in a listed company, whereas the value is what is actually obtained by the purchase of a share title, namely the value of cashflow that this will be able to generate in the future." He went on: "Price and value in moments of financial turbulence can be very far apart and the price generated in financial markets can therefore not correspond with the fundamental value of a share title. Brexit is undeniably an event that causes substantial shocks on short-term prices, we will see what happens in the long-term. Uncertainty now reigns in the minds and hearts of investors. And uncertainty is one of the most dangerous elements for financial markets, " he said. "Prices are guided by investor expectations and market dynamics that, in some cases, can temporarily escape the economic fundamentals they represent. Extreme events such as Brexit strongly modify investor expectations, probably also creating an overall repositioning of market dynamics. The effects could go beyond the short-term. We will see over the next few weeks how European political institutions will respond. Europe today returns to being a very uncertain place to invest in, and the markets don't like this. It signals lack of confidence in the European project, which has revealed itself to be all too fragile, too distant and, now, a little less credible. Unfortunately if we do not teach Europeans about Europe, I fear that the road ahead will be increasingly uphill." (AGI). .