To examine what affects Finnish investors’ willingness to take risk in financial decisions data was collected from surveys conducted by the Federation of Finnish Financial Services (Finanssialan Keskusliitto). The surveys used were: the Survey of Household Liabilities and Assets (Kotitalouksien varat ja velat) 2008; Survey of Young People (Nuorisotutkimus) 2008; Survey of Senior Citizens (Senioritutkimus) 2008; Banking Survey (Pankkibarometritiedote) I/2008 and I/2009; Current State of the Finnish Economy. A description of each of the above, as well as an explanation of the data and methodology used in this thesis is given in the text that follows.
The Federation of Finnish Financial Services is an interest group that represents banks, insurance agencies, finance companies, securities brokerages, and employers of the finance industry that operate in Finland. In addition to lobbying for its members and aiming to secure the Finnish financial industry a safe, effective and well-functioning operating environment, the group also gathers statistics and releases publications.
These publications include surveys, banking guides, and guidelines for good practices in banking and insurance. (Finanssialan Keskusliitto 2009b)
The Survey of Household Liabilities and Assets 2008 was done by the Federation of Finnish Financial Services using statistical data from the Bank of Finland (Suomen Pankki), Financial Supervision (Rahoitustarkastus), the Ministry of Finance (Valtiovarainministeriö), and Statistic Finland (Tilastokeskus). The survey examined household income, consumption, savings, the incurring of debt, and the division of financial assets. The survey was published 4.6.2008. (Finanssialan Keskusliitto 2008a)
The Survey of Young People 2008 was conducted in January of 2008 by IROResearch on behalf of the Federation of Finnish Financial Services, as an interview study of more than 1,000 young people from all over Finland aged 15-28. The questions in the interview concerned spending, borrowing, saving, methods of payment as well as interests in banking and economic affairs. The survey was published 16.6.2008.
(Finanssialan Keskusliitto 2008b)
The Survey of Senior Citizens 2008 was also conducted in January 2008 by IROResearch on behalf of the Federation of Finnish Financial Service. The survey was carried out by interviewing 207 people belonging to an age group of 75-85. The interview questions were akin to those of the Survey of Young People. The survey was published 24.6.2008. (Finanssialan Keskusliitto 2008d)
The Banking Survey is published four times a year. The survey inquires the views of 350 bank managers concerning the lending and deposits of households and businesses. The respondents include bank managers, office directors, and credit managers among other senior bank office officials at the four largest Finnish banks:
Nordea, OP-Pohjola Group, Sampo Bank, and Savings Banks (Säästöpankit). The responses are indicated as percentage values of the respondents. This thesis examines the Banking Survey of the first period of 2008 (published 26.3.2008) as well as 2009 (published 31.3.2009). (Finanssialan Keskusliitto 2008c; 2009c)
The Current State of the Finnish Economy contains key graphs prepared by the Federation of Finnish Financial Services. As with the Survey of House Hold Liabilities and Assets, this survey also contains statistical information compiled from official financial institutions such as the Bank of Finland, European Commission, Statistics Finland, The Organization of Economic Co-operation and Development (OECD), and the Ministry of Finance. The data shows the general trend of the Finnish economy by
focusing on consumer and industrial confidence, stock prices, interest rates, inflation, employment, and GDP. (Finanssialan Keskusliitto 2009a)
The data used in this thesis centers mainly around the information of the different surveys concerning household financial assets – especially those in savings accounts, mutual funds, and stocks1. The criteria of households for choosing financial assets are also of interest. The analysis of the data seeks to find a congruence between the different surveys and explain the results in the view of behavioral finance and in the spirit of this thesis.
The methodology of this thesis is simply to compare, analyze and draw conclusion of the research data presented above. No complex statistical tests are run simply because the data at hand did not allow for it and the necessary numeric data was not available.
However, the surveys above contain results from previous studies that date all the way back to 1997. This allows for a convenient way to examine what kinds of trends emerge from the data. In addition, the interest group has done age group comparisons in the surveys, which permit a suitable method of examining differences and similarities in between the groups. Both of these features serve the purposes of this thesis adequately.
For achieving results and drawing conclusions of the statistical data, the data is examined in the same groups as presented in the surveys. Young people (aged 15-28) form their own group as do senior citizens (aged 75-85). These two groups allow for a clear examination of how their financial environments differ according to their age. A particular interest is the amount of savings and investments in both groups, as well as the type of financial assets that equity is tied to.
Another point of interest is to examine how the Finnish stock market index and the average rate of inflation have developed during the lifespan of the senior citizens and the young people. A comparison is done to see if the conclusion can be drawn that individuals’ experiences of economic circumstance have affected their willingness to take risk and thus their financial decisions and ultimately their present financial situation.
1 In the context of this thesis, savings accounts are seen as low risk forms of investment. Consequently,
mutual funds and stocks are viewed as being higher risk forms of investments.
The average rate of inflation is calculated from data obtained from Statistic Finland. The data showing the development of the Finnish stock market index OMX Helsinki was obtained from the archives of Kauppalehti.fi, the web portal of one of the leading business newspapers in Finland.
In reference to the two previous chapters, it must be noted that the data obtained to illustrate the development of the average rate of inflation in Finland goes back in time only until 1975. Also, the data of the development of the Finnish stock market index stretches back only until 1993. Thus, to the limits of the data at hand, this thesis is forced to make certain assumptions in connection to the points of interest described in the previous chapters. This fact is also brought up in conclusions of this thesis.
Households form their own group and are considered a general representative of all Finnish consumers (including both young people and senior citizens). The composition of their financial assets are also examined and compared to that of the senior citizens and young people, which are in turn compared to the results of the banking surveys and to the statistics of the Current State of the Finnish Economy –survey. The aim of these comparisons is to aid in drawing conclusions of the research results.