Causal Evidence on Regular Internet Use and Stock Market Participation

86 Pages Posted: 14 Mar 2012 Last revised: 30 Dec 2013

Markus Glaser

Ludwig Maximilian University of Munich - Faculty of Business Administration (Munich School of Management)

Alexander Klos

University of Kiel - Institute for Quantitative Business and Economics Research (QBER)

Date Written: December 23, 2013

Abstract

Stock market participation rates have been quite stable or even dropped over the last years although more households regularly use the Internet. This observation contradicts earlier scientific evidence that the advent of the Internet increased stock market participation rates. Based on representative data from household panel surveys and with the help of two instruments for Internet usage we show that the Internet indeed has a positive and causal effect on stock market participation. Additionally, we present a solution of the puzzling observation above by showing that the positive effect of Internet usage on stock market participation is driven by households with a high degree of financial literacy and new Internet adopters were financially illiterate on average in recent years.

Keywords: Stock market participation, transaction costs, Internet, financial literacy

JEL Classification: D14, G11

Suggested Citation

Glaser, Markus and Klos, Alexander, Causal Evidence on Regular Internet Use and Stock Market Participation (December 23, 2013). Available at SSRN: https://ssrn.com/abstract=2021158 or http://dx.doi.org/10.2139/ssrn.2021158

Markus Glaser (Contact Author)

Ludwig Maximilian University of Munich - Faculty of Business Administration (Munich School of Management) ( email )

Schackstra├če 4
Munich, 80539
Germany

Alexander Klos

University of Kiel - Institute for Quantitative Business and Economics Research (QBER) ( email )

Heinrich-Hecht-Platz 9
Kiel, 24118
Germany

HOME PAGE: http://www.qber.uni-kiel.de/

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