European Union enlargement and equity markets in accession countries

Tomas Dvorak and Richard Podpiera

No 552, Working Paper Series from European Central Bank

Abstract: The announcement of 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 find 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% of the stock price increase. JEL Classification: F36, G15, G12

Keywords: asset pricing; EU enlargement; international financial integration (search for similar items in EconPapers)
Date: 2005-11
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Citations: View citations in EconPapers (4)

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Related works:
Journal Article: European Union enlargement and equity markets in accession countries (2006)
Working Paper: European Union Enlargement and Equity Markets in Accession Countries (2005)
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Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbwps:2005552

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