The Effectiveness of Finnish Small Cap Mutual Funds: a Quantitative Study of the Finnish Mutual Funds Investing in the Small Cap Equity Markets of Finland from 2013 to 2016

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School of Business | Bachelor's thesis
Degree programme
(Mikkeli) Bachelor’s Program in International Business
Objectives The main objective of this thesis is to examine the effectiveness of all the eight currently operational Finnish small cap mutual funds by using descriptive and inferential statistical methods. The secondary objective of the thesis is to determine whether passively managed funds are viable options to active ones. Summary This study collected the return indices, for a three-year period ending June of 2016, of the funds and selected stock market indices, and calculated monthly returns using the return data. The findings were analyzed by using charts of cumulative returns, performance related ratios, t-tests and the Fama-French three-factor model. Conclusions The results of the study indicate that in the aggregate small cap funds could improve their effectiveness significantly. Additionally, passive alternatives, such as index mutual funds and exchange-traded funds are viable competitors to actively managed funds. The main reason for the conclusion is that only one of the eight funds that were analyzed could yield better overall results than the benchmark index. OMX Helsinki Small Cap -index was chosen to be the benchmark because it was determined to be the best proxy of the Finnish small cap equity markets. One likely reason for the malperformance of the funds are their high fees which can hinder returns.
Thesis advisor
Stepanov, Roman
active investment management, passive investment management, mutual fund, OMX Helsinki Small CAp, Fama-French three-factor model
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