Working Paper: NBER ID: w30383
Authors: 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.
Keywords: broadband internet; stock market participation; individual investors; portfolio choices; financial democratization
JEL Codes: D04; D14; D15; G00; G11; G40
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| broadband internet use (L96) | stock market participation (G10) |
| broadband internet use (L96) | portfolio choices (G11) |
| broadband internet use (L96) | participation in bonds and bond funds (G12) |
| broadband internet use (L96) | financial wealth (G51) |
| broadband internet use (L96) | returns on financial wealth (G19) |