Survivorship Bias and Performance of Mutual Funds in Hungary

Abstract

The article aims at finding whether the survivorship bias significantly influences the achieved returns of the surviving mutual funds in Hungary. Furthermore, the article looks at the situation on financial market, and in particular at the moment of nationalizing the competitive pension funds and at the importance of inflow rates in finding reasons for failed funds dissolution. The empirical results indicate insignificance of survivorship bias in the analyzed mutual fund database in 2000-2012 period. The influence of the dissolved funds on the returns of surviving entities in given sub-periods was limited and evaluated differently for each type of funds. The indirectly drawn conclusions about the liquidation of funds resulting from the market conditions were partly confirmed. Moreover, the asset outflow of the funds classified as non-survivors was moderately correlated with an increase in the number of dissolved funds (but only in some sub-periods), which may be attributed to financial market situation.