Broadband internet and stock market participation

This paper examines the effect of broadband Internet on household stock market participation. By exploiting the expansion of broadband in the U.S. from 1999 to 2008, we find that the availability of broadband in a household's zip code significantly increases the likelihood of stockholding and the share of wealth invested in stocks. Moreover, this effect operates through a higher tendency to follow the stock market, indicating that broadband access reduces the information cost associated with stockholding. The effect of broadband access concentrates among people with high socioeconomic status. By contrast, the arrival of broadband has little impact on the portfolio choice and stock market following of people with low socioeconomic status, who most need to improve wealth accumulation. Our study sheds light on the role of technology development in household finance and the potential distributional effect of technology diffusion.