Nascent Markets: Understanding the Success and Failure of New Stock Markets

70 Pages Posted: 7 Nov 2016

See all articles by Jose Alexandre Albuquerque de Sousa

Jose Alexandre Albuquerque de Sousa

Norwegian School of Economics (NHH); Erasmus Research Institute of Management (ERIM); Erasmus University Rotterdam (EUR), Rotterdam School of Management (RSM)

Thorsten Beck

City University London - Sir John Cass Business School; Tilburg University - European Banking Center, CentER

Peter A. G. van Bergeijk

Erasmus University - Institute of Social Studies (ISS)

Mathijs A. Van Dijk

Erasmus University - Rotterdam School of Management; Erasmus Research Institute of Management (ERIM)

Multiple version iconThere are 2 versions of this paper

Date Written: November 2016

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.

Keywords: stock exchanges; financial development

JEL Classification: G10, G18, O16

Suggested Citation

Albuquerque de Sousa, Jose Alexandre and Beck, Thorsten and van Bergeijk, Peter A.G. and Van Dijk, Mathijs A., Nascent Markets: Understanding the Success and Failure of New Stock Markets (November 2016). CEPR Discussion Paper No. DP11604. Available at SSRN: https://ssrn.com/abstract=2865873

Jose Alexandre Albuquerque de Sousa (Contact Author)

Norwegian School of Economics (NHH) ( email )

Helleveien 30
Bergen, NO-5045
Norway

Erasmus Research Institute of Management (ERIM) ( email )

P.O. Box 1738
3000 DR Rotterdam
Netherlands

Erasmus University Rotterdam (EUR), Rotterdam School of Management (RSM) ( email )

P.O. Box 1738
Room T08-21
3000 DR Rotterdam, 3000 DR
Netherlands

Thorsten Beck

City University London - Sir John Cass Business School ( email )

106 Bunhill Row
London, EC1Y 8TZ
United Kingdom

Tilburg University - European Banking Center, CentER ( email )

PO Box 90153
Tilburg, 5000 LE
Netherlands

Peter A.G. Van Bergeijk

Erasmus University - Institute of Social Studies (ISS) ( email )

PO Box 29776
2502 LT The Hague, 2518 AX
Netherlands

HOME PAGE: http://www.economie.blogspot.com

Mathijs A. Van Dijk

Erasmus University - Rotterdam School of Management ( email )

P.O. Box 1738
Rotterdam, 3000 DR
Netherlands
+31 10 408 1124 (Phone)
+31 10 408 9017 (Fax)

HOME PAGE: http://mathijsavandijk.com/

Erasmus Research Institute of Management (ERIM)

P.O. Box 1738
3000 DR Rotterdam
Netherlands

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