Social interaction, Internet access and stock market participation-An empirical study in China

Social interaction plays an important role in transmitting relevant information to potential investors. However, the informational role of social interaction might be affected by other information channels, which is to a large extent ignored in previous studies. Using a national representative household finance survey data covering more than 8000 Chinese households, we demonstrate that social interaction alone positively affects household stock market participation, but Internet access mitigates the influence of social interaction. In particular, among households with the access to Internet, sociable households in effect are associated with a 6 percentage-point decrease in the probability to participate in the stock market. This finding supports the substitution between Internet access and social interaction as information channels. Moreover, we also identify the social multiplier effect of social interaction: sociable households living in the communities with higher stock market participation rate are more likely to invest in stocks.