Europe Stocks Could Plunge 24% in Brexit, Stress Study Shows

European equities could lose about a quarter of their value in the immediate aftermath of a U.K. secession from the European Union, a study testing the effects of Brexit showed.

Risk-modeling firm Axioma Inc. found that stocks would take the hardest hit among asset classes when it simulated the effects of a “Leave” vote on a hypothetical portfolio composed of 54 percent bonds, 41 percent shares and the rest in alternative investments. Pound-denominated investments would slump 10 percent, more than those in euros, the model showed.

Equities have remained relatively calm in the run-up to the June 23 referendum, even as volatility for Britain’s currency has surged to its highest level since 2009. While U.K. stocks have become among the best performers in Europe this year amid a weaker pound and a rebound in miners, they are also the most at risk, according to Axioma.

“There is an assumption that Brexit is not going to happen — if it happens, no one is mentally fully geared up for it yet,” Philip Jacob, one of the researchers who authored the report, said in a phone interview from New York. “We’ll see the equity market really, really move. ”

To simulate the potential impact of a Brexit, Axioma analyzed the market response to past events including the multi-year European debt crisis and Scottish referendum. It didn’t define the why or how of the likely reaction. The stress test only captures the short-term market impact, not structural changes that an exit would have on the economy in the longer term, the risk-management firm said.

The report comes as polls increasingly point to a close race, with some recent surveys even showing the “Leave” camp pulling ahead. Still, the FTSE All-Share Index has almost erased its annual losses, while the Stoxx Europe 600 Index remains down 6.7 percent.

U.S. investors may be more vulnerable to a fallout from a vote to exit. They’ve increased their allocation to British equities since May of last year, according to a separate report by Nasdaq OMX Group Inc.’s advisory-services unit. Those in the U.K., on the other hand, have been the biggest sellers, it showed.