Abstract
We evaluate the efficiency of mutual fund managers of 20 different classes of management styles to identify the most efficient strategies and to propose an optimal pattern in selecting the funds by investors. We collect monthly data of 17,686 US mutual funds for a five-year period 2005-2010 to minimize the impact of survivorship bias and use Data Envelopment Analysis (DEA) model to evaluate the mutual fund performance. The set of considered inputs comprised "variance", representing the mutual fund risk, and "turnover, expense ratio and loads indicators", reflecting the mutual fund costs and fees. Two kinds of outputs are taken into account by our DEA model, "portfolio return" and "stochastic dominance indicators". As a unique contribution, we state the benefits of the DEA approach in the DARA, CARA, and IARA framework, and evaluate the efficiency of mutual funds based on fund strategies as well as the performance of best mutual funds among their group. The evidence shows that the efficiency scores of technical, management, and scale are respectively 0.81, 0.921, and 0.874 for the DARA model, while the efficiency scores of two models of CARA and IARA are negligible. Also, we rank each management strategy in any model based on two methods - the number of referencing and the weighted value so that the managers of inefficient strategies must pattern the managers' ability of reference (efficient) strategies to improve their efficiency on the fund market in future.
| Original language | English |
|---|---|
| Pages (from-to) | 677-695 |
| Number of pages | 19 |
| Journal | Journal of Business Economics and Management |
| Volume | 14 |
| Issue number | 4 |
| DOIs | |
| Publication status | Published - 2013 |
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Keywords
- CARA
- DARA
- Data envelopment analysis
- IARA
- Mutual fund
- Stochastic dominance
ASJC Scopus subject areas
- Business, Management and Accounting (miscellaneous)
- Economics and Econometrics
Cite this
The efficiency evaluation of mutual fund managers based on DARA, CARA, IARA. / Baghdadabad, Mohammad Reza Tavakoli; Tanha, Farid Habibi; Halid, Noreha.
In: Journal of Business Economics and Management, Vol. 14, No. 4, 2013, p. 677-695.Research output: Contribution to journal › Article
}
TY - JOUR
T1 - The efficiency evaluation of mutual fund managers based on DARA, CARA, IARA
AU - Baghdadabad, Mohammad Reza Tavakoli
AU - Tanha, Farid Habibi
AU - Halid, Noreha
PY - 2013
Y1 - 2013
N2 - We evaluate the efficiency of mutual fund managers of 20 different classes of management styles to identify the most efficient strategies and to propose an optimal pattern in selecting the funds by investors. We collect monthly data of 17,686 US mutual funds for a five-year period 2005-2010 to minimize the impact of survivorship bias and use Data Envelopment Analysis (DEA) model to evaluate the mutual fund performance. The set of considered inputs comprised "variance", representing the mutual fund risk, and "turnover, expense ratio and loads indicators", reflecting the mutual fund costs and fees. Two kinds of outputs are taken into account by our DEA model, "portfolio return" and "stochastic dominance indicators". As a unique contribution, we state the benefits of the DEA approach in the DARA, CARA, and IARA framework, and evaluate the efficiency of mutual funds based on fund strategies as well as the performance of best mutual funds among their group. The evidence shows that the efficiency scores of technical, management, and scale are respectively 0.81, 0.921, and 0.874 for the DARA model, while the efficiency scores of two models of CARA and IARA are negligible. Also, we rank each management strategy in any model based on two methods - the number of referencing and the weighted value so that the managers of inefficient strategies must pattern the managers' ability of reference (efficient) strategies to improve their efficiency on the fund market in future.
AB - We evaluate the efficiency of mutual fund managers of 20 different classes of management styles to identify the most efficient strategies and to propose an optimal pattern in selecting the funds by investors. We collect monthly data of 17,686 US mutual funds for a five-year period 2005-2010 to minimize the impact of survivorship bias and use Data Envelopment Analysis (DEA) model to evaluate the mutual fund performance. The set of considered inputs comprised "variance", representing the mutual fund risk, and "turnover, expense ratio and loads indicators", reflecting the mutual fund costs and fees. Two kinds of outputs are taken into account by our DEA model, "portfolio return" and "stochastic dominance indicators". As a unique contribution, we state the benefits of the DEA approach in the DARA, CARA, and IARA framework, and evaluate the efficiency of mutual funds based on fund strategies as well as the performance of best mutual funds among their group. The evidence shows that the efficiency scores of technical, management, and scale are respectively 0.81, 0.921, and 0.874 for the DARA model, while the efficiency scores of two models of CARA and IARA are negligible. Also, we rank each management strategy in any model based on two methods - the number of referencing and the weighted value so that the managers of inefficient strategies must pattern the managers' ability of reference (efficient) strategies to improve their efficiency on the fund market in future.
KW - CARA
KW - DARA
KW - Data envelopment analysis
KW - IARA
KW - Mutual fund
KW - Stochastic dominance
UR - http://www.scopus.com/inward/record.url?scp=84890215797&partnerID=8YFLogxK
UR - http://www.scopus.com/inward/citedby.url?scp=84890215797&partnerID=8YFLogxK
U2 - 10.3846/16111699.2011.651625
DO - 10.3846/16111699.2011.651625
M3 - Article
AN - SCOPUS:84890215797
VL - 14
SP - 677
EP - 695
JO - Journal of Business Economics and Management
JF - Journal of Business Economics and Management
SN - 1611-1699
IS - 4
ER -