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Broadband Internet and the Stock Market Investments of Individual Investors

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

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

  • Hans K. Hvide & Tom G. Meling & Magne Mogstad & Ola L. Vestad, 2022. "Broadband Internet and the Stock Market Investments of Individual Investors," NBER Working Papers 30383, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:30383
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    2. 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.
    3. Lorenz Meister & Karla Schulze, 2022. "How Shocks Affect Stock Market Participation," DIW Roundup: Politik im Fokus 142, DIW Berlin, German Institute for Economic Research.
    4. 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).

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    More about this item

    JEL classification:

    • D04 - Microeconomics - - General - - - Microeconomic Policy: Formulation; Implementation; Evaluation
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • D15 - Microeconomics - - Household Behavior - - - Intertemporal Household Choice; Life Cycle Models and Saving
    • G00 - Financial Economics - - General - - - General
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G40 - Financial Economics - - Behavioral Finance - - - General

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