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This article examines the institutional and macroeconomic determinants of stock market development using a panel data of 42 emerging economies for the period 1990 to 2004. This article finds that macroeconomic factors such as income level, gross domestic investment, banking sector development, private capital flows and stock market liquidity are important determinants of stock market development in emerging market countries. The results also show that political risk, law and order and bureaucratic quality are important determinants of stock market development because they enhance the viability of external finance. This result suggests that the resolution of political risk can be an important factor in the development of emerging stock markets.
