The monthly index measures investor confidence or risk appetite by analyzing actual buying and selling patterns of institutional investors, State Street Global Markets, the investment research and trading arm of State Street Corp, said in statement. A reading greater than 100 means that institutional investors are increasing their allocations to risky assets, meaning they're buying stocks. A reading less than a 100 indicates the opposite: investors are selling equity positions. A reading of 100 is neutral, meaning that institutional investors are neither increasing nor decreasing their allocations to risky assets.
"While confidence among European and Asian investors has broadly stabilized, this month's reading on North American risk appetite signals a clear set-back," Kenneth Froot, a Harvard University professor and co-developer of the index, said in a statement. "We did note some concrete buying of European equities, excluding the U.K., as policy makers took pains to try to limit the 'tail-risk' of a euro-currency break-up, but in other regions flows were negative."
Paul O'Connell of State Street Associates, the other co-developer of the index, added that the numbers suggest that "institutions are in a cautious mode, pending resolution of some of the key growth and debt concerns that continue to hang over the global economy." He noted, however, that there may be "some holiday and seasonal effects behind the numbers given that the North America's investor confidence has declined each August since 2008.