Investor Sentiment in Japanese and U.S. Daily Mutual Fund Flows

46 Pages Posted: 11 Mar 2002  

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)

Takato Hiraki

Tokyo University of Science - School of Management

Noriyoshi Shiraishi

Rikkyo University - School of Social Relations

Masahiro Watanabe

University of Alberta - School of Business; University of Alberta - Department of Finance and Statistical Analysis

Multiple version iconThere are 4 versions of this paper

Date Written: September 2002

Abstract

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 "Bull" and "Bear" domestic funds. The flows to bear foreign funds in Japan display some evidence of negative correlation to foreign bull and equity funds. They appear to be independent of domestic bull and bear fund flows, 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 complements.

Keywords: Investor Sentiment, Mutual Fund Flows, Bull and Bear Funds, Factor Pricing Mod

JEL Classification: G15

Suggested Citation

Brown, Stephen J. and Goetzmann, William N. and Hiraki, Takato and Shiraishi, Noriyoshi and Watanabe, Masahiro, Investor Sentiment in Japanese and U.S. Daily Mutual Fund Flows (September 2002). Yale ICF Working Paper No. 02-09; AFA 2003 Washington, DC Meetings; EFA 2002 Berlin Meetings Presented Paper. Available at SSRN: https://ssrn.com/abstract=302829 or http://dx.doi.org/10.2139/ssrn.302829

Stephen J. Brown

New York University - Stern School of Business ( email )

Stern School of Business
44 West 4th Street
New York, NY 10012-1126
United States
212-998-0306 (Phone)
212-995-4233 (Fax)

William N. Goetzmann

Yale School of Management - International Center for Finance ( email )

165 Whitney Ave.
P.O. Box 208200
New Haven, CT 06520-8200
United States
203-432-5950 (Phone)
203-436-9252 (Fax)

HOME PAGE: http://viking.som.yale.edu

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Takato Hiraki

Tokyo University of Science - School of Management ( email )

6-3-1 NiiJuku Katsushika-Ku
Tokyo, 125-8585
Japan
+81-480-21-7611 (Phone)
+81-480-21-7654 (Fax)

Noriyoshi Shiraishi

Rikkyo University - School of Social Relations ( email )

3-chome Nishi-ikebukuro
Toshima-ku
Tokyo, 171-8501
Japan

Masahiro Watanabe (Contact Author)

University of Alberta - School of Business ( email )

School of Business - FMS
University of Alberta
Edmonton, Alberta T6G 2R6
Canada
780-492-7343 (Phone)
780-492-3325 (Fax)

HOME PAGE: http://www.ualberta.ca/~masa/

University of Alberta - Department of Finance and Statistical Analysis ( email )

2-32C Business Building
Edmonton, Alberta T6G 2R6
Canada

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