State Street Global Markets, has released the results of the State Street Investor Confidence Index for July 2005.
According to the July index, investor confidence decreased by 2.9 points from June’s revised reading of 85.0.
Developed by Harvard University professor Ken Froot and Paul O’Connell of State Street Associates, the research unit of State Street Global Markets, the index measures investor confidence on a quantitative basis, analyzing actual buying and selling patterns of institutional investors. The index is based on the financial theory that assigns precise meaning to changes in investor risk sentiment, or the willingness of investors to hold proportionally more or less of their portfolio in higher-risk investments.
“We are seeing that institutional investors prefer to take some risk off the table across their portfolios,” commented Froot. “This suggests that investors do not trust that the low recorded levels of price volatility in the marketplace will continue going forward. They are acting as though considerably more risk is present.”
“This picture is strongest in the U.S.,” added O’Connell. “This month U.S. investors had the greatest desire to cut their risk levels. Indeed, investors in Europe and Asia appeared to be willing to accept some additional risk from investors in the U.S.”