Developed through State Street Global Markets’ research partnership, State Street Associates, by Harvard University professor Ken Froot and State Street Associates Director Paul O’Connell, the State Street Investor Confidence Index measures investor confidence on a quantitative basis by analyzing the actual buying and selling patterns of institutional investors. The index is based on financial theory that assigns precise meaning to changes in investor risk appetite, or the willingness of investors to allocate their portfolios to equities. The more of their portfolio that institutional investors are willing to devote to equities, the greater their risk appetite or confidence.
“After last month’s steep decline, the fourth in a row, this month risk appetite rebounded somewhat among institutional investors,” commented Froot. “Interestingly, this increase occurred against a backdrop of declining market prices, including a decline in US equity markets of 7.75 percent. The numbers indicate that, at these price levels, institutional investors are prepared to provide liquidity to other market participants such as retail investors and the leveraged community.”
“The confidence of institutional investors in both North America and Europe stabilized through the month, in a pattern echoed by US consumer confidence,” added O’Connell. “While institutions continue to be tentative about deploying risk, our underlying data shows that sectors such as healthcare, utilities, consumer staples are benefiting from the improvement in risk appetite, albeit from very low levels.”
January Results
Global 68.8
N. America 71.8
Europe 86.6
Asia-Pacific 85.4
