A Comprehensive Method for Ranking Mutual Fund Performance

Abstract

The increasing guidance requirement in choosing mutual funds contribute to the development of an abundant literature on approaches of ranking funds performance. However, all the commonly used single index and multi-indexes ranking methodologies have their own drawbacks and are in fact not suitable for a reasonable and practical mutual funds comprehensive ranking sometimes. More specifically, the single index measures are incomprehensive, controversial, or even ineffective sometimes, while the mostly used multi-indexes methods do not make full use of evaluation information and usually indirect and inflexible in reality. This paper proposes a paired competition based mutual fund multi-indexes comprehensive performance ranking method which could avoid most of the shortcomings of existing approaches with six good characteristics: it is a comprehensive ranking method that reflects different performance aspects; it provides both cardinal and ordinal information for various practical applications; it integrates both individual evaluation information and joint comparison information for obtaining a more accurate and robust ranking scheme; it has a flexible framework to process complicated data situation; it reveals true strength of fund without distortion; it is convenient to operate in practice. In addition, a more reasonable objective weighted method is proposed to deal with the indexes correlation problems.