State Street global Investor Confidence Index (ICI) fell to 101.4 in September, down 3.5 points from August’s revised reading of 104.9.

The fall was driven by sentiment in North America, which declined 7.6 points to 104.5 from August’s revised reading of 112.1.

Meanwhile, compared to their revised August readings, European confidence rose by 4.7 points to 101.7 while Asian confidence rose by 2.1 points to 95.3.

The Investor Confidence Index was developed by State Street Associates, State Street Global Exchange’s research and advisory services business, and Harvard University professor Kenneth Froot. It measures investor confidence or risk appetite quantitatively by analyzing the actual buying and selling patterns of institutional investors.

The index assigns a precise meaning to changes in investor risk appetite: the greater the percentage allocation to equities, the higher risk appetite or confidence. A reading of 100 is neutral; it is the level at which investors are neither increasing nor decreasing their long-term allocations to risky assets. The index differs from survey-based measures in that it is based on the actual trades, as opposed to opinions, of institutional investors.

"September’s Global reading on investor sentiment, taken before the FOMC’s decision to delay the taper, gave back some of the recent gains but remains robust," commented Ken Froot. "Similarly positive business confidence readings suggest that investors will be resilient to the reduction in the Fed’s asset purchases when they finally come."

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"There is still a sizable but narrowing gap between North American and Asian investors," noted Jessica Donohue, senior managing director and head of research and advisory services at State Street Global Exchange. "The fear of the Fed’s liquidity withdrawal has had a disproportionally larger impact in Asia where investors are also worrying about slower growth in China. With the worst of those fears yet to materialize, it will be interesting to see if this sentiment gap diminishes further next month."