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Investment guarantees in financial products: an analysis of consumer preferences

Author

Listed:
  • Daliana Luca

    (Helvetia Insurance Group)

  • Hato Schmeiser

    (University of St. Gallen)

  • Florian Schreiber

    (Lucerne University of Applied Sciences and Arts)

Abstract

We analyze the preferences of 1180 German consumers for investment guarantees in financial products by means of choice-based conjoint and latent class analysis. Based on the segment-level partworth utility profiles, we then identify the most important investment guarantee features, analyze consumer demand in a realistic market setting, and test whether individual purchasing behavior can be explained by socioeconomic characteristics. Our results show that two buyer and two nonbuyer segments exist. Although their willingness to buy varies significantly, we document only a small degree of heterogeneity with respect to the individual guarantee attributes and levels. Across the sample, the guarantee period is most important, followed by the volatility of the underlying fund, and the up-front premium. Finally, we illustrate that particularly those socioeconomic characteristics with an impact on individuals’ financial situation are promising predictors of their willingness to purchase investment guarantees.

Suggested Citation

  • Daliana Luca & Hato Schmeiser & Florian Schreiber, 2023. "Investment guarantees in financial products: an analysis of consumer preferences," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 48(4), pages 906-940, October.
    • Handle: RePEc:pal:gpprii:v:48:y:2023:i:4:d:10.1057_s41288-022-00268-4
    DOI: 10.1057/s41288-022-00268-4
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    More about this item

    Keywords

    Finance; Consumer preferences; Investment guarantees; Individual savings; Choicebased conjoint analysis;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation

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