Romania, Slovakia and Hungary: evolution of mutual funds in recent years

Abstract

Mutual funds and their evolution represent an expression of the performances of capital markets in the majority of states. The inflows and the outflows in mutual funds are used to evaluate the achievements obtained in capital markets all over the world. At the same time, both individual and organizational investors guide their acquisition decisions on information about past accomplishments of the various mutual funds and invest in funds that registered good and very good performances in the past, while trying to give up less performing funds. However, the decision is usually asymmetrical, as investors rather take into consideration the very good past performances of mutual funds and prefer to invest in those, while the pace of giving up to less performing funds is not accordingly prominent. Investors’ behaviour can differ from one country to another and the behaviour of those originating from developed countries and more mature capital markets have been studied to a higher extent internationally, while developing capital markets have been less studied so far. The present paper looks at capital markets from the perspective of mutual funds in three (rather) emerging capital markets located in Central and Eastern Europe, namely: Romania, Slovakia and Hungary. The inflows and outflows in mutual funds are analyzed for the 2007-2014 period and based on that, the investors’ behaviour in the three countries is looked at. The analysis has both a dynamic and a comparative character with the purpose to identify similarities and differences between the three analyzed countries, as well as to identify how they compare with more mature financial and capital markets. The analysis also tries to distinguish specific features of both evolution of mutual funds and investors’ behaviour, in a period that comprised two different stages of the economic cycle: financial crisis and the debut of the economic recovery period.