State Street Associates says its Investor Confidence Index for January 2004 has picked up a decline in optimism. According to the January index, investor confidence fell by 3.1 points to 105.9 from a revised December level of 109.0.
Developed by Harvard University professor Ken Froot and Paul O’Connell of State Street Associates, the index shows that institutional investor confidence has moderated somewhat in January from the twelve-month high reached in December.
“Institutional investors continue to display a tendency to increase their allocation to risky assets,” says O’Connell.
“However, the pace of this portfolio reallocation has slowed somewhat from the level observed towards the end of 2003,” observes Froot.
Launched in September 2003, the State Street Investor Confidence Index combines a model of global investor behavior with information that tracks the common buying patterns of institutional investors around the world. The idea is that, because the index is a quantitative measure based on the investment behaviour of thousands of institutional investors, it provides a more objective indicator than survey-based measures. The index is not directly tied to good or bad news, or to the price of stocks, bonds or other assets, but rather reflects the general sentiment of investors towards risky assets.