WHAT is State Street Investor Confidence Index
The State Street Investor Confidence Index is an index that measures institutional investor confidence. The index looks at actual levels of risk taken by investors in their portfolios and reports on the second-to-last Tuesday of each month, using data it collected at the close of trading on the previous Wednesday. It was co-developed by Harvard professor Ken Froot and State Street associate director Paul O'Connell.
BREAKING DOWN State Street Investor Confidence Index
The State Street Investor Confidence Index measures confidence by looking at actual levels of risk in investment portfolios. Unlike other confidence indices, it is not an attitude survey. The State Street index measures confidence by taking into account the changes in institutional investors' equity holdings. The more of their portfolio that institutional investors are willing to invest in equities, the greater their confidence.
How the State Street Investor Confidence Index is Structured
The State Street Investor Confidence Index is global and is based on activity in 45 countries. The report tracks more than 22 million transactions annually. There are three published components: North America, Europe and Asia-Pacific. The separate weightings of the three components vary month to month based on investment activity and are not published. Also included in the global index, but not published, is activity in South America and the Middle East.
State Street Investor Confidence Index and Market Sentiment
Market sentiment is the general prevailing attitude of investors as to how prices in a market will develop. This attitude is formed by the accumulation of numerous factors, including price history, economic reports, seasonal factors and current events.
If investors expect the stock market to rise, the sentiment is said to be bullish. If investors expect the stock market to go fall, the market sentiment is bearish. It is believed to be a good predictor of market moves, especially when it is more extreme.
Market sentiment is monitored with a variety of technical and statistical methods such as the number of advancing versus declining stocks and the comparisons of new highs versus new lows. A large share of overall movement of an individual stock is attributed to market sentiment.
Additional indicators exist to measure the sentiment specifically of foreign-exchange markets. Various retail foreign-exchange brokerage firms publish positioning ratios (similar to the put/call ratio) and other data regarding their own clients' trading behavior.
Unlike most measures of market sentiment, which measure attitudes, the State Street Investor Confidence Index measures actual holdings.