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Stock Market Participation and the Internet

Published online by Cambridge University Press:  06 April 2009

Vicki Bogan
Vicki Bogan
Affiliation:
[email protected], Department of Applied Economics and Management, Cornell University, 454 Warren Hall, Ithaca, NY 14853
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Abstract

Theory indicates that frictions (e. g., information and transaction costs) could account for the lower than expected stock market participation rates. This paper examines the hypothesis that there has been a fundamental change in participation and links this change to the reduction of these frictions by the advent of the Internet. Using panel data on household participation rates over the past decade, the results show computer/Internet using households raised participation substantially more than non-computer using households. The increased probability of participation was equivalent to having over $27,000 in additional household income or over two more mean years of education.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 43 , Issue 1 , March 2008 , pp. 191 - 211
Copyright
Copyright © School of Business Administration, University of Washington 2008

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