Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/152986 
Year of Publication: 
2005
Series/Report no.: 
ECB Working Paper No. 552
Publisher: 
European Central Bank (ECB), Frankfurt a. M.
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.
Subjects: 
asset pricing
EU enlargement
international financial integration
JEL: 
F36
G15
G12
Document Type: 
Working Paper

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