FIN-02-011 |
NYU Stern School of Business |
March 2002
Stephen J. Brown, William N. Goetzmann, Takato Hiraki, Noriyoshi Shiraishi and Masahiro Watanabe
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
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.
Classification: G15.
Stephen J. Brown
Institution: Stern School of Business, New York University, 44th West 4th Street, New York, NY 10012
Telephone: 212-998-0306
Fax: 212-995-4233
Email: sbrown@stern.nyu.edu
Homepage: http://www.stern.nyu.edu/~sbrown/
William N. Goetzmann,
Institution: Yale School of Management, Box 208200, 135 Prospect Street, New Haven CT 06520-8200
Telephone: 203-432-5950
Fax: 203-432-8931
Email: william.goetzmann@yale.edu
Takato Hiraki
Institution: International University of Japan
Noriyoshi Shiraishi
Institution: Rikkyo University
Masahiro Watanabe
Institution: Yale School of Management, Box 208200, 135 Prospect Street, New Haven CT 06520-8200
Email: masahiro.watanabe@yale.edu
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