Global investor confidence increased sharply in March, according to figures released today by State Street Global Markets.

The State Street Investor Confidence Index for March rose by 10.0 points to 100.6 from February’s revised reading of 90.6.

Looking regionally, the confidence of North American institutional investors rose strongly from 101.9 to 115.1. The confidence of European investors decreased 5.1 points to 87.4, while the confidence of Asian investors increased slightly from a revised reading of 82.5 to 82.8.

Developed through State Street Global Markets’ research partnership, State Street Associates, by Harvard University professor Ken Froot and State Street Associates Director Paul O’Connell, the index measures investor confidence on a quantitative basis by analyzing the actual buying and selling patterns of institutional investors. The index is based on financial theory that assigns precise meaning to changes in investor risk appetite, or the willingness of investors to allocate their portfolios to equities. The more of their portfolio that institutional investors are willing to devote to equities, the greater their risk appetite or confidence.

“The strong increase in the confidence of global institutional investors can be traced back to the market turmoil that began towards the end of last month,” said Froot. “Once the initial volatility abated, institutional investors stepped in and allocated towards equities in the second week of March to take advantage of better valuations that were presented. While some participants in the marketplace wanted to divest themselves of equities over recent weeks, institutional investors have been ready and willing to take the other side.”

“Looking regionally, there is a striking divergence in views,” added O’Connell. While U.S. investors felt comfortable increasing their exposure to equities in March, European confidence fell back from its recent high levels, and Asian investor confidence remained broadly flat for a second month running. At the same time, the overall level of buying and selling activity has increased, and confidence may be more volatile going forward.”