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 …