How Online Trading Intensity and Financial Advisors Influence Investors’ Gambling Preferences

How does online trading intensity influence investors’ gambling preferences? How do financial advisors shape the relationship between online trading intensity and gambling preference? This study answers these important questions in response to concerns about whether digital technologies such as the Internet exacerbate the tendency of retail investors to gamble in the stock market. Leveraging transactional trading data of approximately 20,000 investors and more than 450,000 monthly observations, we find a U-shaped relationship between online trading intensity and investors’ holdings of lottery-like securities. Interestingly, we show that financial advisors flatten this relationship between online trading intensity and investors’ holdings of lottery-like securities. In other words, financial advisors can reduce the undesirable costs associated with online trading. These findings, which draw on literature at the intersection of information systems and behavioral finance, provide valuable insights on how the Internet influences stock trading. Our work suggests the continued relevance and importance of human capital (e.g., financial advisors) in the digital era increasingly shaped by artificial intelligence, and provides guidance as to when financial advisors are more effective in reducing investors’ gambling preferences.