Yesterday, I wrote about Destabilization: you can say that a story begins when one or more characters have their lives destabilized, and that the story ends when their lives are stable again. To add to this, let me talk about the forms that the final stability may take.
One possible type of stability is going back to the status quo that existed at the beginning of the story. You often see this in books for kids: all problems have been solved, all monsters are defeated, and everything is back to “normal”. This is fine for children—many kids haven’t learned to cope with change. Furthermore, it means the same story can be read multiple times, and a series of books can be read in any order.
But it doesn’t work well for adults. Adults know that things never stay the same, and they like to see people dealing with change. So even if a threat is defeated (or a puzzle is solved, or the protagonist manages to get home after a difficult journey), adults want to see characters develop. The experience should leave the characters stronger, or wiser, or more wary, or something. Otherwise, the whole experience meant nothing. (That’s perilously close to “It was all a dream”. Haha, everything was pointless!)
The newly established stability doesn’t have to be “nice”. If a character gives up hope, that’s still a form of stability. It may not be an enjoyable result, but it is an ending and may be suitable for some stories.
(You can get away with “downer” endings in short stories more than in novels. Consider horror stories, for example; plenty of them end with the protagonist dying in some gruesome way. However, ending a novel with everything awful may be too grim to satisfy readers who’ve spent hours of their lives on the book.)
Stability doesn’t mean that every loose end has been tied up. Stories that are part of a series almost always have loose ends; a dangling thread in Book 1 may start the plot in Book 2. But even stories that will never have a sequel may have loose ends. If so, I think it’s useful to acknowledge the loose ends in some way. Otherwise, readers may just think that the writer fumbled the ball. By acknowledging I mean something like, “George never did find out where the dagger came from,” or something like that. (Preferably something more elegantly phrased, but still.)
One way or another, a story begins when the first domino falls. At the end, readers should feel that there are no dominoes left, even if the dust hasn’t completely settled. If dominoes are still in motion, the story just isn’t over yet.