The research questions have been developed based on the review of literature in chapter two. The objective of the thesis is to improve knowledge on average household consumer’s investing behavior that would contribute to a deeper understanding of the factors affecting investment intentions. The focus is on two of the most popular investment alternatives among Finnish consumers, namely stocks and investment funds. Accordingly, the main research question is:
How do different factors affect Finnish consumers’ investment intentions in stocks and investment funds?
In order to be able to solve the main question comprehensively, the following six supportive questions were designed:
1. How do expected investment value, compatibility and behavioral control affect consumer investment intentions?
According to consumer choice theory, consumers’ are most likely to purchase a product or a service with the highest perceived value (Dodds &
Monroe 1985; Thaler 1985; Monroe & Chapman 1987; Zeithaml 1988;
Chang & Wildt 1994). However, it has been suggested in behavioral theories, such as the theory of reasoned action (Fishbein & Ajzen 1975) and the theory of planned behavior (Ajzen 1985) that the evaluation of the object of behavior alone is insufficient to fully explain consumer behavior.
Therefore, in order to create a more comprehensive view on the antecedents of investment intention, the effects of behavioral control and compatibility will be assessed. Perceived behavioral control in this thesis refers to one’s perception of the sufficiency of his or her financial resources for investing (adapted from East 1993), whereas compatibility refers to the extent the consumer feels the investment alternative fits into his or her lifestyle and needs (adapted from Rogers 1995).
2. How does expected sacrifice affect expected investment value?
As the first sub question measures the direct effects of factors on consumer investment intentions, the latter questions concentrate on the relationships between the underlying factors. As the research also not only aims to identify factors that increase investment intentions, but also the
factors that inhibit investing activities, a deeper look into the sacrifices that consumers expect from investing and on their effects on expected value is essential. Accordingly, we aim to test whether consumers consider other factors than the potential financial losses to decrease their expectation of the investment’s value. In the case of other consumer products and services, most academic research has found a negative relationship between the constructs, yet some contradictory findings also exist (e.g.
Cronin et al. 2000).
3. How does subjective investment knowledge affect expected sacrifices and expected investment value?
The role of consumers’ investment knowledge on investing activities has been underlined in recent academic studies (e.g. Lusardi & Mitchell 2005;
Campbell 2006; Lusardi & Mitchell 2007; Pellinen 2011). Yet, it has been pointed out that more empirical research is required in order to better understand the consequences of financial knowledge (e.g. Pellinen 2011).
Several studies within the field of consumer behavior have recognized that consumers with higher product knowledge use different evaluative strategies and decision processes than consumers with less knowledge, and therefore evaluate products differently (e.g. Bettman & Park 1980;
Brucks 1985; Rao & Monroe 1988; Biswas & Sherrell 1993). Since understanding the effects of investment knowledge is essential for all actors in the financial sector, we aim to find out, how self-assessed knowledge affects consumer’s investment related expectations.
4. How do expected investment value, expected sacrifices, and behavioral control affect compatibility?
Even though some scholars have defined compatibility as an antecedent of consumer value (e.g. Lai 1995; Kleijnen et al. 2007), we suggest that compatibility can only be assessed after the consumer has formed an expectation of value, and therefore hypothesize a reversed relationship.
Moreover, as it has been suggested that the less effort and learning investing requires the higher the compatibility is (Chakravarty & Dubinsky 2005), we want to test whether expected sacrifices affect compatibility similarly in the investment context. Finally, it has been suggested that when consumer’s behavior is volitional, they attempt to align their behavior with their self-identity and to reduce cognitive dissonance (Karahanna et al. 2006), thus we hypothesize a relationship between behavioral control and compatibility.
5. How do the effects of expected investment value, expected sacrifices, subjective investment knowledge, compatibility, and behavioral control on investment intention differ in terms of stock investments and investment fund investments?
To better understand whether consumer motivations to invest in stocks and mutual funds differ, we aim to test the theoretical model twice - first with empirical data concerning stock investments and then with data concerning investment funds.
6. How do the dimensions of expected investment value and expected sacrifices as well as subjective investment knowledge, compatibility, behavioral control and investment intentions differ between consumers with and without prior investment experience?
The last research question is more descriptive one and examines the differences between consumers with and without prior investment experience. Prior research has indicated that consumers with greater product experience evaluate products more positively than consumers with less experience (Mason & Bequette 1998; Johnson et al. 2003), which causes consumers with less experience to make repeated choices over time. Therefore, one of our interests is to test whether there are significant differences in consumer investment evaluations based on their previous experience, which could indicate that consumers are prone to sticking to inferior investment options due to cognitive lock-in.