Oldřich Rejnuš

Modeling the Size of the Mutual Fund Industry in Countries of Central and Eastern Europe

The rapid growth and development of the mutual fund industry throughout the world stimulated vast contemporary studies focusing on a wide range of issues predominantly of microeconomic character, such as fund performance, timing ability, fees and fund flows, thus leaving determinants and attributes of mutual fund industry development beyond their research. The rare relevant studies predict that development of the mutual fund industry depends on a number of factors among which the predominant role belongs to development of the economic and financial systems, and quality of governance and regulatory basis. One essential condition of validity of this prediction is that it is based upon a sample of developed economies, thus leaving a space for the likelihood that under condition of developing or middle-income economies some expectations may substantially deviate from the predication. This paper aims to reevaluate the significance of the impact of individual macro- and microeconomic factors, which were identified in previous studies, on size of asset under management in the sample of high- and middle-income economies of Central and Eastern Europe by means of regressing the total size of the mutual fund industry and size of its separate components, such as equity, fixed income and money market asset management over a number of independent variables. The obtained results indicate that out of a wide range of factors, the high explanatory power of which was stressed by earlier studies, only a small group of them turned out to be significant in our research. In particular, it was found that the size of the CEE mutual fund industry in general and the sizes of its particular segments respond positively on increase of country openness to trade and capital inflows, development and stability of local financial and capital markets, improvement of quality of governance and regulatory basis. Also some controversial evidence was obtained on the role of change in government indebtedness for explaining the size of the mutual fund industry – in general, there is a significantly positive impact of a decrease of central government debt on the size of CEE asset management, however its sign is not consistent across all subcategories of funds. Although the chosen sample does not cover as large a number of countries as previous studies, it provides brief insight into the CEE mutual fund industry, documenting important country and regional characteristics.

The present significance of commodity exchange trading in the conditions of the current world economy

The paper discusses the importance of commodity exchange trading while placing a special emphasis on the increasingly close interconnection between commodity markets and financial instruments markets. The aim of the paper is to prove that at present, commodity markets cannot be seen as strictly separate from markets trading in financial instruments, as there are increasingly close links between the two, which effectively lead to the transfer of financial resources invested in the financial market into the real economy. The paper analyses the most significant ties that already exist between the commodities and financial investment instruments in the financial and capital market, as well as the links that are very likely to come into existence in the near future. In the concluding part, there is a summary of the reasons that will necessarily lead to a further world-wide development of commodity exchange trading and a prediction of the lines along which this development is likely to take place.

Performance Evaluation of Equity Mutual Funds in Countries with Emerging Economies: Evidence from BRIC, CEE, sea and MENA Regions

The fundamental principle of classical portfolio theory states that mature capital markets are nearly efficient thus offering no extra returns and low possibilities for international portfolio diversification. Thus it is not a surprise that in the recent 20 years mutual funds from emerging economies with their high growth rates, frequent abnormal returns and less than perfect positive correlation with developed economies have been attracting an increasing volume of international investment flows. In this context evaluation of emerging markets funds performance has become a frequent topic of discussion and research by modern portfolio theory and theory of capital markets equilibrium. Here it is necessary to state two things about existing studies: the one thing is that they provide quite mixed results - on average, local equity funds do not generate abnormal returns, but they still exist; and the other thing is that such evidence is structured predominantly upon country evidence, thus limiting the possibility to derive some generalized conclusions about mutual fund performance in particular groups of emerging economies or emerging economies per se. Another common drawback of existing studies is their frequent usage of data suffering with survivorship bias, which in light of short time-series of available observations, obviously do not add precision to conclusions, derived on the basis of such samples. In light of the stated above the paper aims to reevaluate absolute and relative risk-adjusted performance of open-end equity mutual funds on the sample of advanced, secondary and frontier economies from the Central and Eastern Europe, from the South Eastern Asia, from the Middle East and North Africa, and BRIC economies for the time span from Q1/2000 to Q1/2015. Following established practice, fund performance is evaluated by means of unconditional and conditional single-factor and multifactor CAPM time-series regressions under which individual fund returns are regressed over factor loadings, given by Sharpe and Treynor ratios, Jensens alpha and M squared, Fama-French and Carhart measures, raw input data for which is collected from Bloomberg terminal and data sets of World Development Indicators and International Financial Statistics. On the basis of a large number of performance measures and attributes employed in this research as well as survivorship-bias free database, the chosen study provides a useful insight into mutual fund performance of particular groups of emerging economies or emerging economies per se, documenting important country and regional characteristics.