An Assessment of the Real Development Prospects of the EU 28 Frontier Equity Markets

The present research is the first to concentrate only on the EU 10 frontier markets and their internal diversification potential for the equity market segments. The EU 10 frontier markets present all five characteristics identified by the academic literature for the (equity) frontier markets. A sixth characteristic was identified and added for the EU 10 frontier securities markets. The results show that the EU 10 frontier markets exhibit internal diversification potential and therefore can present interesting investing opportunities for domestic and international investors. The internal diversification potential seems to be lower in the cases of Latvia and Malta, with trading concentrated around the pharmaceutical and banking sectors, respectively. Romania has a peculiar position with an apparently limited internal diversification potential. These general results complete and enhance, from an inside-out point of view, the findings of partial integration of the EU 10 frontier markets and the overall conclusion that they present diversification opportunities for international portfolios.