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Volume 67, Issue 6


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

Filip, Dariusz

Year: 2017   Volume: 67   Issue: 6   Pages: 512-538

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.

JEL classification: G11, G23, G29

Keywords: performance, mutual funds, fund size, quadratic regression, CEE markets

RePEc: https://ideas.repec.org/a/fau/fauart/v67y2017i6p512-538.html

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