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Success in complex decision contexts: The impact of consumer knowledge, involvement, and risk willingness on return on investments in mutual funds and stocks

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Abstract:

Consumer knowledge, involvement, and risk are central concepts in consumer behavior research. A review of prior research shows however that there is no universally agreed understanding of how these concepts should be defined, nor on how they are related in terms of antecedents, dimensions, and consequences. In this study the relationship between these key concepts were explored and their impact on consumers' return on investments in mutual funds was analyzed. Theory based alternative relationships were systematically tested in SEM analyses. The study sheds new light on the knowledge concept by showing that the knowledge construct should be modeled in terms of three dimensions (ability, opportunity, and familiarity) in complex decision contexts (mutual funds and stocks). The hypothesized importance of domain specific knowledge was confirmed and a mediation analysis showed the relations of involvement and risk willingness to knowledge and returns. Consumers' ability and opportunity to get access to stock market information is strongly related to their involvement, which in turn influence both familiarity and risk willingness. Risk willingness has a stronger effect on return than does familiarity.

Keywords: Consumer knowledge; involvement; mutual funds; novices versus experts; risk willingness; stocks

Document Type: Research Article

DOI: https://doi.org/10.1080/09593960500197594

Affiliations: Marketing Department, University of Goteborg, Sweden

Publication date: 2005-10-01

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