46 Pages Posted: 11 Mar 2002
Date Written: September 2002
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: 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