Collaborators: José A. Albuquerque de Sousa, Thorsten Beck, Peter A.G. van Bergeijk, and Mathijs A. van Dijk

We study the success and failure of 40 newly established (“nascent”) stock markets since 1974 in their first 40 years of activity. Nascent markets differ markedly in their success, as measured by number of listings, market capitalization, and trading activity. Long-term success is mostly determined by early success, as well as by country characteristics at the moment of establishment. Banking sector development at establishment and the dynamics of national savings are the most reliable predictors of success. A high initial number of listings and trading activity are necessary, but not sufficient, conditions for success. These results point to the important role of initial conditions but also initial success in fostering long-term stock market development.