European Union enlargement and equity markets in accession countries
By: prepared by Tomáš Dvořák and Richard Podpiera.
Contributors: Podpiera, Richard.; International Monetary Fund. Monetary and Financial Systems Dept.
Series: IMF working paper -- WP/05/182
Publisher: International Monetary Fund, Monetary and Financial Systems Dept.
Published: 2005
Place of publication: Washington, D.C
Language: eng
Number of pages: 27
Subjects: European Union -- Membership.; Stocks -- Prices -- Econometric models.; Europe -- Economic integration.
Description: 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.
Notes: "September 2005."

Includes bibliographical references (p. 18-19).

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