Road to Stock Market Participation

We study the impact of a national road construction program that brought access to previously unconnected pincodes in India, on stock market participation. Using a unique dataset on the trading behavior of over 13 million individuals, we find that construction of new feeder roads to a pincode increases the number of new investors by 28.7% and the number of trades by 64.5% and the effects are larger for rural vs. urban areas and for pincodes at intermediate levels of development. The stock market participation effects are largely driven by new bank branch openings within three years of the road construction suggesting a financial inclusion channel. We also see greater effects for pincodes more distant from the nearest big city, greater portfolio diversification, and increased trading in companies located farther away, all suggesting an information channel.