European Union Enlargement and Equity Markets in Accession Countries
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Summary:
The announcement of the European Union enlargement coincided with a dramatic rise in stock prices in accession countries. This paper investigates the hypothesis that the rise in stock prices was a result of the repricing of systematic risk due to the integration of accession countries into the world market. We found that firm-level stock price changes are positively related to the difference between a firm's local and world market betas. This result is robust to controlling for changes in expected earnings, country effects, and other controls, although the magnitude of the effect is not very large. The differences between local and world betas explain nearly 22 percent of the stock price increase.
Series:
Working Paper No. 2005/182
Subject:
Asset prices Financial institutions Financial markets Inflation Market capitalization Prices Stock markets Stocks
English
Publication Date:
September 1, 2005
ISBN/ISSN:
9781451862010/1018-5941
Stock No:
WPIEA2005182
Pages:
28
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