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

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  • Stephen Brown
  • William Goetzmann
  • Takato Hiraki
  • Noriyoshi Shiraishi
  • 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 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.

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Bibliographic Info

Paper provided by Yale School of Management in its series Yale School of Management Working Papers with number ysm274.

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Date of creation: 01 Mar 2002
Date of revision: 01 Apr 2008
Handle: RePEc:ysm:somwrk:ysm274

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Web page: http://icf.som.yale.edu/
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Keywords: Investor Sentiment; Mutual Fund Flows; Bull and Bear Funds; Factor Pricing Mod;

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