Fostering capital market integration: Is there a role for a CMU equity market index?

In the EU there are still 27 national capital markets, which do not function as one. What measures could reduce fragmentation and improve access to finance for companies, particularly for smaller companies in small countries with less developed capital markets?

A recent CEPS study, prepared at the request of DG FISMA, investigates the feasibility of a CMU Equity Market Index Family. The idea is that the creation of a CMU all-share index, as well as CMU sectoral and thematic sub-indices, entails the elimination of capital markets’ geographical labels. These are typical of the current classifications of capital market and weigh negatively on small and new EU member states. Eliminating them could help to attract both large investors and more funds towards smaller capital markets. At the same time, a wide use of such new indices would foster EU capital market integration.

AUTHORS: Cinzia Alcidi (Project Director, CEPS), Willem Pieter de Groen (Project Manager, CEPS), Aleš Berk Skok (subcontractor, CEPS), Igor Lončarski (subcontractor, CEPS), Inna Oliinyk (CEPS), Roberto Musmeci (CEPS) and Mattia Di Salvo (CEPS).