IDEAS home Printed from https://ideas.repec.org/a/fau/fauart/v67y2017i6p512-538.html
   My bibliography  Save this article

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

Author

Listed:
  • Dariusz Filip

    (Cardinal Stefan Wyszynski University in Warsaw (UKSW), Faculty of History and Social Sciences, Poland)

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.

Suggested Citation

  • Dariusz Filip, 2017. "Mutual Funds: Does the Performance Erosion Effect Exist? Evidence from the Czech Republic, Hungary and Poland," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 67(6), pages 512-538, October.
    • Handle: RePEc:fau:fauart:v:67:y:2017:i:6:p:512-538
    as

    Download full text from publisher

    File URL: http://journal.fsv.cuni.cz/storage/1398_512_-_538_filip_final_issue_6_2017.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Michael C. Jensen, 1968. "The Performance Of Mutual Funds In The Period 1945–1964," Journal of Finance, American Finance Association, vol. 23(2), pages 389-416, May.
    2. Boris Podobnik & Vanco Balen & Timotej Jagric & Marko Kolanovic, 2007. "Croatian and Slovenian Mutual Funds and Bosnian Investments Funds (in English)," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 57(3-4), pages 159-177, June.
    3. Jen Sin Lee & Shyan-Rong Chou & Ying-Jen Chen, 2008. "Longer Tenure, Greater Seniority, or Both? Evidence from Open-End Equity Mutual Fund Managers in Taiwan," Asian Academy of Management Journal of Accounting and Finance (AAMJAF), Penerbit Universiti Sains Malaysia, vol. 4(2), pages 1-20.
    4. Dahlquist, Magnus & Engström, Stefan & Söderlind, Paul, 2000. "Performance and Characteristics of Swedish Mutual Funds," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 35(3), pages 409-423, September.
    5. Vijayakumar N & Muruganandan S & Chandra Sekhara Rao K, 2012. "The Relationship Between Fund Performance and Fund Characteristics: Evidence from India," The IUP Journal of Applied Finance, IUP Publications, vol. 18(2), pages 5-18, April.
    6. Bialkowski, Jedrzej & Otten, Roger, 2011. "Emerging market mutual fund performance: Evidence for Poland," The North American Journal of Economics and Finance, Elsevier, vol. 22(2), pages 118-130, August.
    7. Gábor Bóta & Mihály Ormos, 2016. "Is There a Local Advantage for Mutual Funds That Invest in Eastern Europe?," Eastern European Economics, Taylor & Francis Journals, vol. 54(1), pages 23-48, January.
    8. Joseph Chen & Harrison Hong & Ming Huang & Jeffrey D. Kubik, 2004. "Does Fund Size Erode Mutual Fund Performance? The Role of Liquidity and Organization," American Economic Review, American Economic Association, vol. 94(5), pages 1276-1302, December.
    9. Payne, Thomas H. & Prather, Laurie & Bertin, William, 1999. "Value Creation and Determinants of Equity Fund Performance," Journal of Business Research, Elsevier, vol. 45(1), pages 69-74, May.
    10. Tang, Ke & Wang, Wenjun & Xu, Rong, 2012. "Size and performance of Chinese mutual funds: The role of economy of scale and liquidity," Pacific-Basin Finance Journal, Elsevier, vol. 20(2), pages 228-246.
    11. Dariusz Filip, 2013. "Returns and Persistence of Investment Fund Performance in the Czech Republic," Prague Economic Papers, Prague University of Economics and Business, vol. 2013(3), pages 324-342.
    12. Kraus, Alan & Litzenberger, Robert H, 1976. "Skewness Preference and the Valuation of Risk Assets," Journal of Finance, American Finance Association, vol. 31(4), pages 1085-1100, September.
    13. Laurent Bodson & Laurent Cavenaile & Danielle Sougné, 2011. "Does size affect mutual fund performance? A general approach," Journal of Asset Management, Palgrave Macmillan, vol. 12(3), pages 163-171, August.
    14. Ding, Bill & Shawky, Hany A. & Tian, Jianbo, 2009. "Liquidity shocks, size and the relative performance of hedge fund strategies," Journal of Banking & Finance, Elsevier, vol. 33(5), pages 883-891, May.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Miljan Lekovic & Dragana Gnjatovic, 2018. "Contribution of the Investment Funds Industry to Development Performances of the Republic of Serbia," Economic Alternatives, University of National and World Economy, Sofia, Bulgaria, issue 2, pages 197-212, June.
    2. Dariusz Filip, 2018. "The impact of fund attributes on performance: Empirical evidence for Polish equity funds," Zbornik radova Ekonomskog fakulteta u Rijeci/Proceedings of Rijeka Faculty of Economics, University of Rijeka, Faculty of Economics and Business, vol. 36(2), pages 465-488.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Dariusz Filip, 2018. "The impact of fund attributes on performance: Empirical evidence for Polish equity funds," Zbornik radova Ekonomskog fakulteta u Rijeci/Proceedings of Rijeka Faculty of Economics, University of Rijeka, Faculty of Economics and Business, vol. 36(2), pages 465-488.
    2. Sonal Babbar & Sanjay Sehgal, 2018. "Mutual Fund Characteristics and Investment Performance in India," Management and Labour Studies, XLRI Jamshedpur, School of Business Management & Human Resources, vol. 43(1-2), pages 1-30, February.
    3. Grose, Chris & Dasilas, Apostolos & Alexakis, Christos, 2014. "Performance persistence in fixed interest funds: With an eye on the post-debt crisis period," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 33(C), pages 155-182.
    4. Mamatzakis, Emmanuel & Xu, Bingrun, 2016. "Managerial attributes and equity mutual fund performance: evidence from china," MPRA Paper 76139, University Library of Munich, Germany.
    5. Antonella Basso & Stefania Funari, 2017. "The role of fund size in the performance of mutual funds assessed with DEA models," The European Journal of Finance, Taylor & Francis Journals, vol. 23(6), pages 457-473, May.
    6. Yanan Li & Wenjun Wang, 2022. "Company visits and mutual fund performance: new evidence on managerial skills," Journal of Asset Management, Palgrave Macmillan, vol. 23(6), pages 504-521, October.
    7. Hung, Pi-Hsia & Lien, Donald & Kuo, Ming-Sin, 2020. "Window dressing in equity mutual funds," The Quarterly Review of Economics and Finance, Elsevier, vol. 78(C), pages 338-354.
    8. Banker, Rajiv & Chen, Janice Y.S. & Klumpes, Paul, 2016. "A trade-level DEA model to evaluate relative performance of investment fund managers," European Journal of Operational Research, Elsevier, vol. 255(3), pages 903-910.
    9. Mohammad Reza TAVAKOLI BAGHDADABAD & Afsaneh NOORI HOUSHYAR, 2014. "Productivity and Efficiency Evaluation of US Mutual Funds," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 64(2), pages 120-143, March.
    10. Braun, Alexander & Ben Ammar, Semir & Eling, Martin, 2019. "Asset pricing and extreme event risk: Common factors in ILS fund returns," Journal of Banking & Finance, Elsevier, vol. 102(C), pages 59-78.
    11. Ľuboš Pástor & Robert F. Stambaugh & Lucian A. Taylor, 2017. "Do Funds Make More When They Trade More?," Journal of Finance, American Finance Association, vol. 72(4), pages 1483-1528, August.
    12. Amaral, Fatima & Reis, Pedro & Pinto, Pedro, 2019. "Evaluating investment fund performance in Portugal," Business and Economic Horizons (BEH), Prague Development Center (PRADEC), vol. 15(2).
    13. Jiong Gong & Ping Jiang & Shu Tian, 2016. "Contractual mutual fund governance: the case of China," Review of Quantitative Finance and Accounting, Springer, vol. 46(3), pages 543-567, April.
    14. Artamonov, Nikita & Voronina, Anna & Emelyanov, Nikita & Kurbatskii, Aleksei, 2020. "Estimation of interest rates’ impact on mutual funds’ performance in the USA," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 58, pages 55-75.
    15. Zia-ur-Rehman Rao & Muhammad Zubair Tauni & Tanveer Ahsan & Muhammad Umar, 2020. "Do mutual funds have consistency in their performance?," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 19(2), pages 139-153, May.
    16. Li Xian Liu & Fuming Jiang & Jizhong Li & Omar Al Farooque, 2021. "Antecedents of Equity Fund Performance: A Contingency Perspective," Review of Pacific Basin Financial Markets and Policies (RPBFMP), World Scientific Publishing Co. Pte. Ltd., vol. 24(01), pages 1-40, March.
    17. Feng, Xunan & Zhou, Mingshan & Chan, Kam C., 2014. "Smart money or dumb money? A study on the selection ability of mutual fund investors in China," The North American Journal of Economics and Finance, Elsevier, vol. 30(C), pages 154-170.
    18. Abramov, Alexander (Абрамов, Александр) & Akshentseva, Kseniya (Акшенцева, Ксения) & Radygin, Alexander (Радыгин, Александр), 2015. "The effectiveness of mutual funds: theoretical approaches and the experience of Russia [Эффективность Паевых Инвестиционных Фондов: Теоретические Подходы И Опыт России]," Ekonomicheskaya Politika / Economic Policy, Russian Presidential Academy of National Economy and Public Administration, vol. 4, pages 60-86.
    19. Martin Rohleder & Hendrik Scholz & Marco Wilkens, 2010. "Survivorship Bias and Mutual Fund Performance: Relevance, Significance, and Methodical Differences," Review of Finance, European Finance Association, vol. 15(2), pages 441-474.
    20. Alexandros Kostakis, 2009. "Performance measures and incentives: loading negative coskewness to outperform the CAPM," The European Journal of Finance, Taylor & Francis Journals, vol. 15(5-6), pages 463-486.

    More about this item

    Keywords

    performance; mutual funds; fund size; quadratic regression; CEE markets;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G29 - Financial Economics - - Financial Institutions and Services - - - Other

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:fau:fauart:v:67:y:2017:i:6:p:512-538. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Natalie Svarcova (email available below). General contact details of provider: https://edirc.repec.org/data/icunicz.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.