How Women’s Political Power Deepens Stock Markets

Financial literacy is frequently presented as a direct path to stronger financial markets. Teach people how interest, inflation, diversification, and investment risk work, and more of them should become confident investors. As participation increases, the expected result is a larger and more liquid stock market.

A new study published in the Borsa Istanbul Review¹ suggests that this sequence is incomplete. After examining 92 developing and transitional economies between 2014 and 2024, researchers found that women’s financial literacy was associated with stronger stock market development. However, the benefits were substantially greater when women also had political representation and operated within effective institutions.

The implication is that knowledge cannot compensate for an environment that prevents people from acting on it. Financial education may create capable investors, but those investors still need legal rights, accessible financial services, trustworthy markets, and the ability to influence the rules governing economic participation.

Financial Literacy Can Expand the Investor Base

The researchers measured female financial literacy using the percentage of women who demonstrated an understanding of inflation, compound interest, risk diversification, and basic numeracy. They compared this information with three dimensions of stock market development: market capitalization relative to GDP, value traded relative to GDP, and turnover relative to market capitalization.

Female financial literacy was positively associated with stock market depth and liquidity. It did not have a statistically significant direct relationship with turnover, which measures how intensively existing shares are traded.

This distinction matters. Financial literacy may encourage more women to enter markets, hold diversified portfolios, and allocate long-term savings to equities without necessarily producing more frequent trading. A market can become broader and better capitalized even when its new participants are not highly active traders.

This also challenges the idea that investor sophistication should be judged primarily by transaction volume. Long-term participation can contribute capital to businesses, enlarge the domestic savings pool, and reduce dependence on a narrow group of wealthy or institutional investors. It may therefore improve market depth without encouraging speculation.

Why Financial Education Is Not Enough

A person can understand diversification and still be unable to open an account, independently control household assets, obtain identification, inherit property on equal terms, or trust that contracts will be enforced. Even when formal restrictions have been removed, high fees, limited digital access, weak investor protections, and social expectations can keep financial knowledge from becoming market participation.

This is where the study’s Capability-Influence-Opportunity framework becomes useful. Financial literacy provides capability. Political representation gives women greater influence over laws and public priorities. Institutional quality creates an opportunity to participate by supporting property rights, contract enforcement, regulatory consistency, and control of corruption.

The framework can be reduced to three practical requirements:

• People must understand the financial system.
• They must have the power and legal freedom to use it.
• They must trust the institutions responsible for protecting them.

If any one of these elements is missing, financial education can produce disappointing results. A government might teach citizens how to invest while leaving account access difficult. Another might improve legal equality without addressing corruption or unreliable enforcement. A third might modernize its exchange while failing to build the knowledge required for households to participate safely.

This helps explain why similar education programs can produce different outcomes across countries. It also aligns with a broader observation explored in Securities.io’s coverage of why FinTech development is an institutional story. Technology and knowledge can reduce friction, but their economic value remains dependent on governance, access, and public confidence.

Political Representation Changes The Economic Environment

The study found that women’s political representation strengthened the relationship between female financial literacy and all three stock market measures. Its moderating influence was more consistent than that of institutional quality alone.

This does not necessarily mean that adding women to parliament immediately causes stock prices or trading volumes to rise. Political representation is better understood as part of a wider environment in which women can influence property laws, financial regulation, education spending, digital access, and protections against discrimination.

These changes can remove barriers that prevent financially capable women from becoming investors, entrepreneurs, or business owners. They can also improve market development indirectly. Greater access to capital can help women-owned businesses expand, formalize, and potentially become candidates for institutional financing or public listings.

The study’s most important result was the positive interaction among financial literacy, political representation, and institutional quality across market depth, liquidity, and turnover. In other words, the strongest markets were not associated with any single intervention. The greatest benefits appeared where knowledge, political influence, and credible institutions coexisted.

The Difference Between Access And Participation

Account ownership is improving rapidly, but access to an account is not the same as meaningful participation in capital markets. The World Bank’s Global Findex 2025 reports substantial growth in digital financial access, while continuing to document differences in how women use accounts, save, borrow, and manage financial disruptions.

This gap separates the first stage of inclusion from the next. A transaction account allows someone to receive wages or make payments. Stock market participation requires additional savings, suitable products, investment knowledge, confidence, and confidence that the system will operate fairly.

The distinction is particularly important as smartphones and investment applications make market access technically easier. Lower friction can attract new investors, but it can also expose inexperienced users to unsuitable products, fraud, leverage, and speculative behavior. Securities.io has previously examined the difference between perceived and tested knowledge in its analysis of what drives people to invest in crypto. Feeling financially informed can influence participation even when objective knowledge remains limited.

Financial inclusion policy therefore cannot stop at increasing the number of accounts. The more meaningful question is whether people can use financial services independently, safely, and productively.

Financial Literacy Is A Form Of Market Infrastructure

The study’s broader contribution is to reposition financial literacy as part of a country’s market infrastructure. Exchanges, clearing systems, disclosure rules, and payment networks are visible components of that infrastructure. Investor knowledge, political inclusion, and institutional trust are less visible, but they determine whether households are willing and able to supply capital.

This perspective has implications for governments trying to develop domestic equity markets. Attracting foreign investors or encouraging companies to list may produce limited progress if household participation remains concentrated among a small segment of the population. Developing local investors can make markets more resilient by increasing the domestic pool of long-term capital.

It may also improve the quality of financial innovation. Providers serving a broader investor base must design products around smaller balances, clearer disclosures, mobile access, stronger consumer protections, and lower transaction costs. That can create a positive cycle in which participation encourages better infrastructure, and better infrastructure attracts additional participants.

The research should still be interpreted carefully. Its international financial-literacy data cover a relatively short period, and the literacy measure focuses on basic concepts rather than advanced investment knowledge. The statistical tests reduce concerns about reverse causality, but they do not conclusively prove that political representation or literacy directly caused markets to deepen.

Investing In The Infrastructure Behind Expanding Markets

For investors seeking exposure to the modernization of global capital markets, Nasdaq offers a relevant example. The company is more than the operator of a prominent American stock exchange. Through Nasdaq Eqlipse, it supplies technology supporting trading, clearing, settlement, market surveillance, and other critical functions used by market operators internationally.

Nasdaq states that its marketplace technology supports more than 135 market infrastructure providers worldwide. Its systems can help exchanges scale capacity, improve resilience, strengthen oversight, and introduce new products as their markets mature.

This makes Nasdaq a picks-and-shovels company within the larger market-development story. If emerging economies broaden domestic investor participation, their exchanges and regulators may require more capable infrastructure to handle additional accounts, trading activity, listings, and compliance demands.

The connection is indirect. The study does not analyze Nasdaq, and improvements in women’s political or financial participation will not automatically translate into revenue for any particular technology provider. Nevertheless, the company demonstrates how investors can approach the theme by examining businesses that provide the operational infrastructure needed for markets to expand.

Building Markets Means Building Agency

The usual financial-literacy narrative places responsibility on individuals: learn more, save more, and make better decisions. This research shows why that explanation is too narrow. People cannot invest their way around legal exclusion, unreliable institutions, inaccessible products, or a lack of political influence.

Financial education remains valuable, but its effectiveness depends on whether people possess the agency to use what they learn. For developing economies, the opportunity is larger than adding another demographic to the investor pool. Enabling financially capable women to participate can mobilize underused savings, support entrepreneurship, diversify market participation, and strengthen the connection between households and productive investment.

The deeper lesson is that stock markets do not develop through financial knowledge alone. They develop when knowledge is supported by political inclusion and institutions worthy of investors’ trust.

References:

¹ Hesarzadeh, R., & Bazrafshan, A. (2026). Financial literacy without voice? Female political empowerment and stock market development in developing countries. Borsa Istanbul Review. https://doi.org/10.1016/j.bir.2026.100905