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Study of the financial economy of investment funds in Bolivia


Title of the project:
Study of the financial economy of investment funds in Bolivia

Head of the project:
Alejandro Vargas Sanchez

The project focuses on the relationship between the profitability achieved and the profitability expected by the Mutual Funds in Bolivia, it is studied the historical returns, their characteristics, the determining factors, as well as the level of risk, taking into account the differences between the Open and Closed Investment Funds.

Bolivia was chosen because currently the publications in the financial field are limited, most of them are focused on the financial intermediation system, therefore, this document presents for the first time an investigation on the financial economy of the Mutual Funds in Bolivia

In principle, the performance of the Investment Funds was studied and their results were compared in terms of profitability and risk with the market model. The exam was conducted using public information obtained from the Supervisory Authority of the Bolivian Financial System. The method used was based on the application of financial indicators and an econometric estimation of the model, in this way it was possible to identify the best Investment Funds and it was possible to characterize them according to their level of balance with respect to the Security Market Line.

Subsequently, an empirical analysis of the determining factors of the historical returns was carried out. Through the formulation of a auto-regressive vector model with panel data and structural auto-regressive vectors, the dynamic interdependencies between the variables that affect the performance of the funds could be analyzed. The results obtained allowed us to conclude that the increase in the interest rate of fixed-term deposits, the reduction in the rate of variation of liquidity of financial entities, the increase in the rate of variation of economic activity and the decrease in inflation, have a positive effect on the profitability of the Mutual Funds.

Finally, we present concepts and applications of financial econometrics models, the main objective was the determination of the level of volatility of the returns reported by the Investment Funds. By estimating heterocedastic auto-regressive models, a baseline could be established to measure the level of risk existing in the profitability achieved by the Investment Funds.