Peter H. Huang Harold E. Kohn Chair Professor of Law James ...

Emotional Impact Analysis
Mutual Funds, 120 the Put-Call Ratio, 121 and the Risk Appetite Index. 122 A recent empirical study finds that
a simple measure of media pessimism constructed from the Wall Street Journal’s daily “Abreast of the
Market” column predicts low stock market prices. 123 EIA of investor sentiment must differentiate
amongst different categories of investors, however, because investor sentiment differs across investors. 124
Although how to accurately and most usefully measure the mood and sentiment of consumers and
investors remain open questions, 125 there are several measures of consumer and investor confidence and
optimism including the ABC News/Money Magazine Consumer Comfort Index; 126 UBS/Gallup Index of
Investor Optimism; 127 the Conference Board’s Consumer Confidence Index; 128 and the University of
Michigan, Institute for Social Research, Survey Research Center Index of Investor Sentiment, Investor
Current Conditions Index, Index of Investor Expectations, Index of Consumer Sentiment, Index of
Consumer Confidence, and Index of Consumer Expectations. 129 A number of studies investigate the
relationship between various measures of consumer confidence or investor sentiment and real economic
variables or stock market performance. 130 Thus, although emotional variables are more difficult to
T. Moran, Review of the VIX Index and VIX Futures, J. INDEXES, Oct./Nov. 2004, at 16; Robert E. Whalley, The
Investor Fear Gauge, 26 J. PORTFOLIO MGMT. 12 (2000). See also http://www.cboe.com/micro/vix/faq.aspx; and
118 Arindam Bandopadhyaya & Anne Leah Jones, Measuring Investor Sentiment in Equity Markets, J. ASSET MGMT.
(forthcoming).
119
Malcolm Baker & Jeffrey Wurgler, Investor Sentiment and the Cross-Section of Stock Returns, J. FIN. (Aug.
2006), available at http://www.afajof.org/journal/forth_abstract.asp?ref=251.
120
Maury R. Randall et al., Pure Contagion and Investors’ Shifting Risk Appetite: Analytical Issues and Empirical
Evidence, 5 INT’L FIN. 401 (2002).
121
Patrick Dennis & Stewart Mayhew, Mutual Fund Cash Flows and Stock Market Performance, 12 J. INVESTING
78 (2003).
122 Manmohan S. Kumar & Avinash Persaud, Pure Contagion and Investors’ Shifting Risk Appetite: Analytical
Issues and Empirical Evidence, 5 INT’L FIN. 401 (2002).
123 Paul C. Tetlock, Giving Content to Investor Sentiment: The Role of the Media in the Stock Market, J. FIN.
(forthcoming).
124 Kenneth L. Fisher & Meir Statman, Investor Sentiment and Stock Returns, FIN. ANALYST S J., Mar./Arp. 2000, at
16.
125 Jeff Dominitz & Charles F. Manski, How Should We Measure Consumer Confidence?, J. ECON. PERSP ., Spring
2004, at 51.
126 http://www.abcnews.go./com.
127 Dennis Jacobe & David W. Moore, Cutting Through the Noise: The UBS Index of Investor Optimism, PUB.
PERSP . Mar./Apr. 2003, at 35. See also http://www.ropercenter.uconn.edu/ubs.html; and
http://www.ubs.com/1/e/about/research/indexofinvestoroptimism.html.
128 http://www.conference-board.org/.
129 http://www.sca.isr.umich.edu.
130 See e.g., Kenneth L. Fisher & Meir Statman, Market Timing in Regressions and Reality, 29 J. FIN. RES. 293
(2006); Kenneth L. Fisher & Meir Statman, Consumer Confidence and Stock Returns, Fall J. PORTFOLIO MGMT. 115
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