Mutual Funds: Does the Performance Erosion Effect Exist? Evidence from the Czech Republic, Hungary and Poland

Finance a úvěr-Czech Journal of Economics and Finance, Vol. 67, No. 6, pp. 512-538, 2017

Posted: 20 Dec 2017 Last revised: 21 Dec 2017

Date Written: December 13, 2017

Abstract

The main aim of this paper is to examine whether the performance of mutual funds in the 2000-2015 period in the Czech Republic, Hungary and Poland was related to net asset value under management. The study is also to verify the hypothesis regarding the fund size at which performance decreases, causing the erosion effect in the three analyzed markets. The obtained results show a slightly positive relationship between asset size and returns. After dividing the total samples of Czech, Hungarian and Polish funds into subsamples consisting of entities with a comparable size of capital bases, it turned out that the main findings can be explained by relations observed in the subsamples of small funds (both Czech and Polish) and partly in Hungarian funds. The presented evidence may be insufficient to confirm or reject the hypothesis about the optimal fund size, but the observed positive influence of assets under management on fund performance suggests that mutual fund industries in the mentioned CEE countries are still in a developing phase and are able to increase the asset size while maintaining efficiency. Hence, the performance erosion effect does not exist in the investigated markets.

Keywords: Performance, Mutual Funds, Fund Size, Quadratic Regression, CEE Markets

JEL Classification: G11, G23, G29

Suggested Citation

Filip, Dariusz, Mutual Funds: Does the Performance Erosion Effect Exist? Evidence from the Czech Republic, Hungary and Poland (December 13, 2017). Finance a úvěr-Czech Journal of Economics and Finance, Vol. 67, No. 6, pp. 512-538, 2017, Available at SSRN: https://ssrn.com/abstract=3089419

Dariusz Filip (Contact Author)

UKSW ( email )

Faculty of History and Social Sciences
Warsaw
Poland

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