The Index of Investor Optimism; – Establishing an Economic Indicator
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The Index of Investor Optimism; – Establishing an Economic Indicator

Over the past decade, the number and influence of American investors has grown enormously. Individual investors now comprise approximately 40 percent of the adult U.S. population and they wield tremendous power over the nation’s economy.

Paul Holmes

Over the past decade, the number and influence of American investors has grown enormously.  Individual investors now comprise approximately 40 percent of the adult U.S. population and they wield tremendous power over the nation’s economy.  In 1996, UBS PaineWebber partnered with the Gallup Organization to launch the Index of Investor Optimism, the only ongoing survey of investor sentiment in the United States.  The goal of the program was to gain insight into the attitudes and behaviors of this important segment of the population, and to ensure that their perceptions and concerns are represented in the national dialogue.

Now in its sixth year, the Index of Investor Optimism has become the premier resource for information on American investor sentiment, and has established UBS as the leading authority on individual investors.  The success of the Index has generated widespread awareness for UBS among national and regional business and news media, government officials, academics and industry influencers. 

Recently, Nobel laureate economist Professor Lawrence R. Klein confirmed the value of the UBS Index of Investor Optimism as an important leading indicator of economic trends.  He concludes that it provides valuable “quantitative information from a strategic universe that has the potential for enlarging the information content of existing economic surveys.”

Objectives

In addition to providing valuable information on American investors, the Index of Investor Optimism was designed to: (1) position UBS as a thought-leader in the industry by creating a credible instrument to measure and predict investor trends; (2) build awareness for the firm among government officials, leading academics, and industry influencers; (3) generate consistent, positive media coverage for UBS not tied to company performance; (4) provide the firm’s investment strategy team with branded spokesperson platform to increase their individual profiles as experts in the field; (5) enhance the firm’s investor education platform and create outreach opportunities for financial advisors with clients and prospects.

Strategy

UBS initiated an exclusive relationship with the Gallup Organization, the nation’s most widely-known and respected polling company, to ensure the credibility of Index of Investor Optimism survey results. The Index was conceived as a potential new economic indicator, and to this end the Index was based on 13 core questions that together measure overall investor optimism.  These core questions were unchanged from October 1996 – January 2002, 44 surveys in all, to track sentiment consistently over time.

The Index also includes a series of explanatory questions that help frame the conditions affecting investor sentiment.  These questions expand the monthly information about investors beyond the core questionnaire to deepen our understanding of investor attitudes.  Supplementing the survey are special topic questions on timely issues of national concern which enrich the context of the core survey and create additional news value for the monthly findings.  Previous Index special topics include investors’ legislative priorities, views on investment sectors, economic outlook, and foreign affairs.

Index of Investor Optimism special surveys serve as the basis for in-depth Index reports, which complement the monthly survey and expand the available knowledge on important investor themes. The reports create outreach opportunities for UBS PaineWebber financial advisors with clients and prospects; strengthen the firm’s investor education platform on such topics as retirement planning, women and investing, and wealth generation; and enhance the UBS brand by positioning the firm as a thought-leader in the industry.

Execution

Index of Investor Optimism findings are distributed to the public and the media on the fourth Monday of each month.  The Index press releases include core data and other newsworthy survey results and feature a quote by UBS PaineWebber’s Mary C. Farrell, one the top investment strategists on Wall Street.   In addition to national and regional media outlets, the findings are distributed to government officials, academic institutions, and financial services industry influencers by request.

Localized versions of the monthly Index of Investor Optimism press releases are distributed to UBS PaineWebber branch office across the country for placement in regional media outlets.   These releases help to position UBS PaineWebber officials as experts in their local markets and increase their profile among existing and potential clients.

Results

Media Coverage – Index of Investor Optimism findings have generated more than 150 million media impressions since 1997, and are regularly covered by top business and news organizations including, The Wall Street Journal, The New York Times, The Financial Times, The Chicago Tribune, Fortune, CNBC, CNNfn, Bloomberg TV, Dow Jones Newswire, the Associated Press and Bloomberg News.

Government Officials—The Index first captured the attention of federal officials in January 1998, when President Clinton’s Council of Economic Advisors used the data for part of the President’s 1998 State of the Union Address.  Since that time, two executives at the Federal Reserve have closely monitored the data.  Steven Sharpe, senior economist for Capital Markets, and Michael Prell, director of Research and Statistics, use the Index as part of their ongoing economic analysis for Federal Reserve Chairman Alan Greenspan.

Industry Influencers – Requests for monthly Index of Investor Optimism findings continue to increase, and current subscribers to the data include industry influencers and UBS competitors such as Merrill Lynch, Morgan Stanely, JP Morgan Chase, Moore Capital Management, Owenoke Capital, American Century Funds and Sanford Bernstein.

Academic Community – Professors at leading academic institutions have used Index of Investor Optimism data for their individual research projects.  Economics and finance professors at Yale University, Duke University, the University of California-Davis and Santa Clara University have recently incorporated Index of Investor Optimism results into their published work. 

Special Reports – More than 150,000 Index of Investor Optimism special reports have been distributed to clients and prospects of the firm.  Index special reports have also served as basis for client investment seminars hosted by UBS PaineWebber branch offices.

Recognition as a Leading Economic Indicator  – In the fall of 2001, Nobel laureate economist Professor Lawrence R. Klein undertook a rigorous examination of the UBS Index of Investor Optimism to determine its value as an indicator of economic trends.  In his recently published study, Dr. Klein concluded that the Index of Investor Optimism offers “fresh insight on the functioning of the U.S. economy.”  He also confirmed that the Index is “as good and probably better in terms of accuracy, than the [other] indices, judging from its degree of correlation with key economic magnitudes such as consumer spending…”
 
Expansion to New Markets – In January 2002, UBS will expand the Index of Investor Optimism survey to Europe as a result of the invaluable information and understanding about investors the firm has gained through the U.S. survey.  The Index – EU 5 covers individual investors in Germany, Great Britain, France, Italy and Spain, and features the same structure and core questionnaire as the U.S Index. 

Summary

All program objectives were realized during this long-term campaign.  Extensive news coverage in top-tier business and news media have established the Index as the leading resource on individual investor sentiment, and the program has been endorsed and used broadly by policy- and decision-makers and other influential individuals.  Additionally, the Index of Investor Optimism has in just five years achieved recognition among one of the world’s most influential economists as an important indicator of U.S. economic trends.

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