Analysis of Polish mutual funds performance: a Markovian approach

Dariusz Filip; Tomasz Rogala

doi:10.21307/stattrans-2021-006

Analysis of Polish mutual funds performance: a Markovian approach

Dariusz Filip Cardinal Stefan Wyszynski University in Warsaw (UKSW), Faculty of Social and Economic Sciences, Department of Finance, Poland ORCID:https://orcid.org/0000-0002-6905-1004 , Tomasz Rogala Cardinal Stefan Wyszynski University in Warsaw (UKSW), Faculty of Mathematics and Natural Sciences, Institute of Mathematics, Poland ORCID:https://orcid.org/0000-0002-0817- 4377 Statistics in Transition new series, vol. 22, 2021, 1, pages: 115–130 Published online: 3 March 2021 DOI 10.21307/stattrans-2021-006

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ABSTRACT

The aim of this study is to determine whether mutual funds provide benefits for their clients. The performance of Polish mutual funds has been evaluated in terms of their efficiency, including their potential inertia over time. Moreover, the use of the phenomenon of economies of scale resulting from assets inflow to the fund by means of the Markovian framework has been examined. The results are consistent with the efficient market hypothesis. When assessing the market-adjusted returns, underperformance was noticed in both small and large funds. The smart money effect, recognised in the literature, is not confirmed here; however, there are some noticeable investor reactions, such as the phenomenon of chasing performance.

KEYWORDS

Markov chain, smart money effect, effectiveness, performance inertia

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