Reassessing Uzbekistan as a Frontier Market: A Risk-Adjusted Equity Valuation

This study investigates the investment attractiveness of Uzbekistan’s stock market within the frontier market classification, applying an adapted version of Damodaran’s 2024 country risk valuation model. By integrating sovereign credit ratings, default spreads, and equity risk premium adjustments, the research estimates Uzbekistan’s implied cost of equity and benchmarks it against comparable post-communist economies—Kazakhstan, Georgia, and Ukraine. The methodology adopts a structured six-step approach to risk-adjusted valuation, ensuring transparency and replicability. The empirical analysis reveals an implied discount rate of 13.5% for Uzbek equities, reflecting persistent liquidity constraints, limited market depth, and institutional risk despite ongoing reforms. Valuation multiples suggest the potential for excess returns relative to risk, but real investment viability remains conditional on regulatory improvements and market development. The paper contributes to frontier market theory by illustrating the practical application of sovereign risk-adjusted models in underdeveloped capital markets and provides policy recommendations aimed at enhancing Uzbekistan’s capital market integration and international appeal.