The Role of Company Affect in Stock Investments: Towards Blind, Undemanding, Non-Comparative, and Committed Love

Abstract

This conceptual article aims to contribute to the discussion of the role of individuals’ perceptions and affective evaluations of companies in their decisions to buy/hold the companies’ stocks. Based on psychological finance and marketing literatures, the authors explicate five different ways in which an individual’s positive affect towards a company may influence his/her decisions to buy/hold the stocks of the company. The authors argue that an individual’s positive affect towards a company has positive influence on overoptimism and on overconfidence in expectations of financial returns from the company’s stock. Furthermore, the authors argue that the positive affect towards for a company has negative influence on the expected financial returns from ownership of its stock which the individual requires or is satisfied with; negative influence on the consideration he/she gives to other investment opportunities; and positive influence on his/her unwillingness to sell its stock. The authors illustrate the influences with “love” metaphors and discuss their implications to the marketing/finance interface.

Keywords: Investor Psychology, Individual Investor, Affect, Love, Consumers, Stakeholders