Determinants of the performance of investment funds managed in Hungary

Abstract

We investigate the performance and time varying risk behaviour of Hungarian equity mutual funds by applying modified versions of the four-factor model applying different market proxies. We classify the funds according to their target markets (Hungary, Central and Eastern Europe [CEE], developed markets) and separate bullish and bearish periods. We find no significant excess returns for any circumstances; however, market betas are significantly different for bullish and bearish periods as well as the explanatory power of book-to-market ratio and market capitalisation. After taking into account the daily percentage changes in the number of shares outstanding we find investors' relation to risk to be different in bearish and bullish periods.

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“…Wermers's observation that clients heavily invest in the last year's winning funds, and the managers of such winners invest the received inflows in momentum stocks in order to continue superior performance, was broadly discussed. The literature concerning anomalies in financial markets (e.g., Dacey andZielonka 2013, Bóta andOrmos 2017) notices that managers of losing portfolios seem reluctant to sell their losing stocks and to purchase the new momentum stocks probably due to the disposition effect. Normally, the effect consists in investors' tendency to sell winning stocks to soon and hold losing stocks too long.…”

Luck and skill in the performance of global equity funds in Central and Eastern Europe

“…Despite the potential of the market, there has been little research on fund performance in CEE to date, and a larger proportion of the literature has concentrated on funds from individual or selected CEE countries (Białkowski and Otten, 2011;B ota and Ormos, 2017;Filip, 2014Filip, , 2017. The few studies analysing the CEE region as a whole have focused only on the general performance of the industry, and they find that it tends to underperform on average (e.g.…”