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Broadband Internet and the Stock Market Investments of Individual Investors

Author

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  • Hvide, Hans K.
  • Meling, Tom G.
  • Mogstad, Magne
  • Vestad, Ola

Abstract

We study the effects of broadband internet use on the investment decisions of individual investors. A public program in Norway provides plausibly exogenous variation in internet use. Our instrumental variables estimates show that internet use causes a substantial increase in stock market participation, driven primarily by increased fund ownership. Existing investors tilt their portfolios towards funds, thereby obtaining more diversified portfolios and higher Sharpe ratios, and do not increase their trading activity in stocks. Overall, access to high-speed internet seems to spur a "Democratization of finance", with individuals making investment decisions that are more in line with the advice from portfolio theory.

Suggested Citation

  • Hvide, Hans K. & Meling, Tom G. & Mogstad, Magne & Vestad, Ola, 2023. "Broadband Internet and the Stock Market Investments of Individual Investors," CEPR Discussion Papers 18067, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:18067
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    2. Liu, Kang & Ren, Yi & Yang, Fei, 2024. "Do national innovation policies lead to technological specialization or diversification? The role of path dependence and spatial spillovers," Economic Analysis and Policy, Elsevier, vol. 84(C), pages 499-520.
    3. Meister, Lorenz & Menkhoff, Lukas & Schröder, Carsten, 2025. "Stock market participation, work from home, and inequality," International Review of Financial Analysis, Elsevier, vol. 107(C).
    4. Zhang, Yan & Wang, Xiaoyang & Zhang, Wenwen, 2025. "The impacts of clan culture on private investment: Financing substitution and human capital accumulation," Journal of Asian Economics, Elsevier, vol. 97(C).
    5. Engel, Janina & Riera, Pau Gayà & Grilli, Joseph & Sola, Pierre, 2022. "Developing reconciled quarterly distributional national wealth – insight into inequality and wealth structures," Working Paper Series 2687, European Central Bank.
    6. Cusato, Antonio & Castillo, José Luis & IDB Invest, 2023. "Access to Credit and the Expansion of Broadband Internet in Peru," IDB Publications (Working Papers) 12922, Inter-American Development Bank.
    7. Lorenz Meister & Karla Schulze, 2022. "How Shocks Affect Stock Market Participation," DIW Roundup: Politik im Fokus 142, DIW Berlin, German Institute for Economic Research.
    8. Zhao, Chunkai & Wang, Runtao & Chen, Boou & Li, Jingrong, 2025. "Hidden costs of separation: Exploring the effect of left-behind experiences on financial market participation in China," Emerging Markets Review, Elsevier, vol. 68(C).
    9. Yin, Libo & Zhu, Xiaoye & Li, Jingtian, 2025. "Does exposure to biodiversity risk drive firms’ digital transformation?," Finance Research Letters, Elsevier, vol. 82(C).
    10. Luo, Peikun & Chen, Yongqing & Shan, Donglu & Wang, Pengcheng, 2025. "Internet use, social capital and high-quality employment," Technology in Society, Elsevier, vol. 83(C).
    11. Fang, Jiali & Jacobsen, Ben, 2024. "Cross-country determinants of market efficiency: A technical analysis perspective," Journal of Banking & Finance, Elsevier, vol. 169(C).
    12. Arenas-Arroyo, Esther & Fernandez-Kranz, Daniel & Nollenberger, Natalia, 2025. "High speed internet and the widening gender gap in adolescent mental health: Evidence from Spanish hospital records," Journal of Health Economics, Elsevier, vol. 102(C).
    13. Outlaw, Dominique, 2023. "Frenzied buyers and sophisticated sellers: How short sellers trade individual investors’ most purchased stocks," Journal of Behavioral and Experimental Finance, Elsevier, vol. 39(C).
    14. Sean Foley & Tom G Meling & Bernt Arne Ødegaard, 2023. "Tick Size Wars: The Market Quality Effects of Pricing Grid Competition," Review of Finance, European Finance Association, vol. 27(2), pages 659-692.
    15. Angelo D’Andrea & Patrick Hitayezu & Mr. Kangni R Kpodar & Nicola Limodio & Mr. Andrea F Presbitero, 2024. "Mobile Internet, Collateral, and Banking," IMF Working Papers 2024/070, International Monetary Fund.

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    Keywords

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    JEL classification:

    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • J2 - Labor and Demographic Economics - - Demand and Supply of Labor

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