Factors of Efficiency of Open Investment Funds in 1997-2015

Abstract

(ProQuest: ... denotes formulae omitted.)IntroductionCollective investment funds are considered to be one of the most successful and effective financial innovations. They can be found in almost all economies of the world, where they play a role or powerful economic strength, or a small financial institution of marginal importance (Khorana et al., 2005). The differences in the meaning of these entities in the economies of individual countries are the result of the interaction of many factors, which by influencing the market of these institutions, inhibit or intensify its development.In the literature, a comprehensive taxonomy of factors affecting market development investment funds has not been developed, and mostly one focused on the related microeconomic, not macroeconomic issues.Factors affecting the development of the investment funds market can be divided into economic, including macro-economic and micro-economic ones, legislative, fiscal, and sociopsychological.The second and third of the above groups is the issue of our paper. This is due to the fact that generally macro and micro-economic factors are considered. A significant impact of tax and legal elements and socio-psychological ones on the effectiveness of the funds themselves is often neglected (although it might be considerable).1. Literature reviewIn the literature there are many publications, mostly international ones which are devoted to investment funds, and most importantly, their effectiveness. It seems that the most important works in this area are those written by J. L. Treynor (1965), W. F. Sharpe (1966), and M. C. Jensen (1968). Although the above mentioned authors conducted a detailed analysis of the US investment funds market, thus the results they received contributed to the development of research on the effectiveness of investment funds of global markets, including Europe. Also S. J. Kon and F. C. Jen (1979) worked over this subject. They conducted a study on a large group of 47 funds, taking into account the efficient market hypothesis. The research done by M. Grinblatt and S. Titman (1989) was conducted in a slightly different direction. Indeed, they showed that effectively managed funds were those whose managers had a very aggressive investment purposes.If, in turn, we consider our home market, the research on investment funds was carried out mainly by T. Miziolek (1997), E. Ostrowska (2003) and K. Perez (2012). The first of them conducted the study on the effectiveness of nine funds in 1997 focusing on the achieved rate of return, Sharpe's, Treynor's or even Jensen's measures. One of the main conclusions of his works was the lack of effectiveness of the surveyed funds. The works by E. Ostrowska concern the similar issue. However, her findings were a bit more optimistic with regard to the results of the national investment funds. K. Perez in his works runs a fairly deep analysis on the problems of the investment funds market both domestic and foreign ones and, most importantly devotes attention to the factors of development of that market sector.Considering the research strictly in the context of the analysis of the factors efficiency, one should primarily pay attention to the economic factors. In this regard, the research was already conducted by A. Demirguc-Kunt and R. Levine (2004), who studied the indicators of financial market development of forty-one countries. Similar research was done by D. Fernando, L. Klapper, Sulla and V. D. Vittas (Ferndando et al., 2003) who analyzed the activities of institutions of commone investment in the nineties of the twentieth century in the forty-developed and economically developing countries.Legal and tax regulations were analyzed by R. La Porta, F. Lopez-de-Silanes, Shleifer A. and R. W. Vishny (La Porta et al., 1998). They found that in countries with weaker investor protection, measured by the nature of regulation and the effectiveness of law enforcement, financial markets were smaller and had lower range. …