European Union Enlargement and Equity Markets in Accession Countries
AbstractThe 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.
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Bibliographic InfoPaper provided by International Monetary Fund in its series IMF Working Papers with number 05/182.
Date of creation: 01 Sep 2005
Date of revision:
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Other versions of this item:
- Dvorak, Tomas & Podpiera, Richard, 2006. "European Union enlargement and equity markets in accession countries," Emerging Markets Review, Elsevier, vol. 7(2), pages 129-146, June.
- Dvorak, Tomas & Podpiera, Richard, 2005. "European Union enlargement and equity markets in accession countries," Working Paper Series 0552, European Central Bank.
- F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
- G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-10-22 (All new papers)
- NEP-EEC-2005-10-22 (European Economics)
- NEP-FIN-2005-10-22 (Finance)
- NEP-FMK-2005-10-22 (Financial Markets)
- NEP-TRA-2005-10-22 (Transition Economics)
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