Investor Sentiment in Japanese and U.S. Daily Mutual Fund Flows
Stephen J. Brown
New York University - Stern School of Business
William N. Goetzmann
Yale School of Management - International Center for Finance; National Bureau of Economic Research (NBER)
Tokyo University of Science - School of Management
Rikkyo University - School of Social Relations
University of Alberta - School of Business; University of Alberta - Department of Finance and Statistical Analysis
NYU Working Paper No. SC-AM-02-02
We find evidence that is consistent with the hypothesis that daily mutual fund flows may be instruments for investor sentiment about the stock market. We use this finding to construct a new index of investor sentiment, and validate this index using data from both the United States and Japan. In both markets exposure to this factor is priced, and in the Japanese case, we document evidence of negative correlations between â¬SBullâ¬? and â¬SBearâ¬? domestic funds. The flows to bear foreign funds in Japan display some evidence of negative correlation to domestic and foreign equity funds, suggesting that there is a foreign vs. domestic sentiment factor in Japan that does not appear in the contemporaneous U.S. data. By contrast, U.S. mutual fund investors appear to regard domestic and foreign equity mutual funds as economic substitutes.
Number of Pages in PDF File: 35working papers series
Date posted: November 13, 2008
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