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Nascent markets: Understanding the success and failure of new stock markets

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  • Beck, Thorsten
  • Albuquerque de Sousa, José
  • Van Dijk, Mathijs
  • van Bergeijk, Peter A.G.

Abstract

We study the success and failure of 59 newly established (“nascent†) stock markets since 1975 in their first 40 years of activity. Nascent markets differ markedly in their success, as measured by number of listings, market capitalisation, and trading activity. Long-term success is in part determined by early success: a high initial number of listings and trading activity are necessary, though not sufficient, conditions for long-term success. Banking sector development at the time of establishment and development of national savings over the life of the stock market are the other two most reliable predictors of success. We find little evidence that structural factors such as country size or legal and political institutions matter. Rather, our results point to an important role of banks, demand factors, and initial success in fostering long-term stock market development.

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  • Beck, Thorsten & Albuquerque de Sousa, José & Van Dijk, Mathijs & van Bergeijk, Peter A.G., 2016. "Nascent markets: Understanding the success and failure of new stock markets," CEPR Discussion Papers 11604, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:11604
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    Keywords

    Stock exchanges; Financial development;

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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