Information Super-Railway? Transportation Infrastructure and Information Production in Capital Markets
69 Pages Posted: 22 Apr 2021 Last revised: 8 Sep 2021
Date Written: August 31, 2021
When large numbers of people are enabled to travel rapidly around the country, will it affect information production in capital markets? We study a government-directed buildout of high-speed rails (HSR) and find that after being connected to the HSR network, firms experience increased information-production activities from market participants. Stock prices, the aggregator of all information, become more liquid and informative and less prone to crashes. These HSR-induced information effects are independent from the effects of firm performance or economic development. A severe HSR accident caused by a lightning strike allows us to observe the counterfactuals and further confirm causality.
Keywords: transportation infrastructure, information, capital markets, high-speed rail
JEL Classification: G14, G18, H54, O18, R40
Suggested Citation: Suggested Citation