Investors' expectations about how the market will perform in the next 12 months are very high, according to a recent index developed by PaineWebber Incorporated of New York and the Gallup Organization of Princeton, N.J. The expectations are especially high among inexperienced investors, the survey found.

The Index of Investor Optimism, which was established in October 1996, is conducted monthly. In the month of July, the index increased 40 points to 171, indicating more optimism, according to PaineWebber.

Overall, investors said they expect their investments to return 16.6 percent, a record high, in the next 12 months, compared to 14.9 in June. Individuals who have invested for five years or less had the highest expectations for short-term returns - 21.1 percent - compared with 14.7 percent for investors with more than 20 years of investing experience.

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