STRATEGIES FOR IMPROVING THE COMPETITIVENESS OF FRONTIER CAPITAL MARKETS

Capital markets of the Western Balkan countries have been predominantly classified as frontier capital markets. Above all, these markets are characterized by a low level of liquidity, small trading volumes, and a low value of market capitalization. Also, there are high transaction costs involved, inefficiency in terms of the efficient market hypothesis, problem of determining the right market prices of securities, lost credibility of the stock market, and the marginalization of the influence of investment funds. Due to these features, frontier capital markets have a low level of their competitive ability. Competitive ability of the frontier capital markets has only recently become interesting to the academic community, which has seen the importance of strengthening competitiveness in less developed capital markets. The connection between the overall economic development and the level of development of the capital market points to the importance of strengthening the competitiveness of the frontier capital markets in order to empower the economy in general. Improving the competitiveness of frontier capital markets implies improvement of the key determinants of these markets, bearing in mind the complexity and two-dimensionality of the competitiveness of the capital market itself. The conducted empirical research focused on the frontier markets of the countries of the Western Balkans (Bosnia and Herzegovina, Serbia, Montenegro, and Macedonia). The research analyzed liquidity as the most important determinant of competitiveness of the selected frontier markets. Also, the research included potential investors as well as issuers on these markets. Based on the identification and analysis of the aspects critical to assessing the competitive ability of frontier capital markets, concrete strategies for improving the competitiveness of frontier capital markets have been created, which was the main goal of the research.