Does the Internet Increase Trading? Evidence from Investor Behavior in 401(k) Plans

47 Pages Posted: 20 Sep 2000  

James J. Choi

Yale School of Management; National Bureau of Economic Research (NBER)

David Laibson

Harvard University - Department of Economics; National Bureau of Economic Research (NBER)

Andrew Metrick

Yale School of Management; National Bureau of Economic Research (NBER)

Multiple version iconThere are 2 versions of this paper

Date Written: July 2000

Abstract

We analyze the impact of a Web-based trading channel on the trading activity in two corporate 401(k) plans. Using detailed data on about 100,000 participants, we compare trading growth in these firms to growth for a sample of firms without a Web channel. After 18 months of access, the inferred Web effect is very large: trading frequency doubles, and portfolio turnover rises by over 50 percent. We also document several patterns of Web-trading behavior. Young, male, and wealthy participants are more likely to try the Web channel. Frequent traders (before Web introduction) are less likely to try the Web. Participants who try the Web tend to stick with it. Web trades tend to be smaller than phone trades both in dollars and as a fraction of portfolio. "Short-term" trades make up a higher proportion of phone trades than of Web trades.

JEL Classification: D0, G0, L0, O0

Suggested Citation

Choi, James J. and Laibson, David and Metrick, Andrew, Does the Internet Increase Trading? Evidence from Investor Behavior in 401(k) Plans (July 2000). Available at SSRN: https://ssrn.com/abstract=237810 or http://dx.doi.org/10.2139/ssrn.237810

James J. Choi

Yale School of Management ( email )

135 Prospect Street
P.O. Box 208200
New Haven, CT 06520-8200
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

David I. Laibson

Harvard University - Department of Economics ( email )

Littauer Center
Room M-14
Cambridge, MA 02138
United States
617-496-3402 (Phone)
617-495-8570 (Fax)

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Andrew Metrick (Contact Author)

Yale School of Management ( email )

165 Whitney Avenue
New Haven, CT 06511
United States
(203)-432-3069 (Phone)

HOME PAGE: http://faculty.som.yale.edu/andrewmetrick/

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Paper statistics

Downloads
446
Rank
40,321
Abstract Views
2,898