The Role of Product and Brand Perceptions in Stock Investing: Effects on Investment Considerations, Optimism and Confidence
47 Pages Posted: 7 Sep 2010
Date Written: July 13, 2010
Behavioral finance researchers are increasingly interested in the relationship between people’s perceptions of companies’ products, on one hand, and their decisions to invest in companies’ stocks, on the other. The purpose of this article is to examine the influence that individuals’ evaluations of companies’ products/brands, in particular, have on their propensities to consider alternative stocks for investment. The authors explicate the main ways of such influence by applying psychological consumer-behavior theories, and test their hypotheses with data gathered from 292 individual investors. The results show that the personal relevance that an investor attaches to a particular company’s product domain has negative influence on the consideration that the individual gives to alternative investment targets, whilst investing in that company’s stock. The individual’s affective evaluation of the company’s brand has a similar effect. Moreover, the results show that an individual’s affective evaluation of a company’s brand has a positive effect on his optimism about the financial returns of the company’s stock. Finally, the results suggest that an individual’s familiarity with the company’s brand does not decrease the consideration that he gives to alternative investment targets, nor is it linked to overconfidence in one’s expectations about the financial returns of the company’s stock.
Keywords: Investing in stocks, consumer behavior, consideration, attitude, confidence, optimism, personal relevance, affective evaluation
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