Constant and variable returns to scale DEA models for socially responsible investment funds

Abstract

In order to evaluate the performance of socially responsible investment (SRI) funds, we propose some models which use data envelopment analysis and can be computed in all phases of the business cycle. These models focus on the most crucial elements of an investment in mutual funds. In the literature both constant and variable returns to scale DEA models have been used to evaluate the performance of mutual funds. An empirical investigation carried out on European SRI equity funds indicates that for the funds analyzed the returns to scale are constant. Another aspect taken into account by the empirical investigation is the measurement of the degree of social responsibility of SRI equity funds in the various European countries. In addition, we have analyzed the performance of the funds considered with the different DEA models proposed, which differ in the way the ethical objective is taken into account. Moreover, the paper focuses on another crucial issue regarding socially responsible investing: the comparison of the performances between SRI and non SRI funds; the empirical study suggests that the ethical objective can be pursued without having to renounce financial rewards.

The role of fund size in the performance of mutual funds assessed with DEA models

“…By adding constraint (10) to the DEA-C model (3)- (8) we obtain the output oriented DEA-V model with variable returns to scale; for further details see Basso and Funari (2014a).…”

“…In order to grasp the idea underlying the DEA model used, let us begin with the DEA-C model (Basso and Funari (2014a)), which is a DEA model with constant returns to scale that can be written in its dual version as follows:…”

“…In order to study the role of size on the performance of mutual funds, we apply the DEA-V model, which is a recent model proposed in Basso and Funari (2014a) that considers the most significant variables for an investor with a well diversified portfolio and can be used even in the presence of negative mean returns.…”

“…In order to analyse if there is any effect of fund size on performance, we carry out an empirical investigation on a set of European equity mutual funds in the period June 2006 to June 2009. In this investigation the measure of relative efficiency of mutual funds is computed by using a suitable DEA model that has been recently proposed in the literature to assess fund performance (Basso and Funari (2014a)); this model allows to take into consideration the main elements of an investment in mutual funds and allows for variable returns to scale.…”

Efficiency of mutual funds in Croatia: a DEA-based approach applied in the pre-crisis, crisis and post crisis period

“…Perez-Gladish et al [28] analysed the efficiency of mutual funds subject to financial and social responsibility criteria using data envelopment analysis consistent with second-order stochastic dominance efficiency. Basso and Funari [5] analysed the performance of socially responsible investment (SRI) funds using various proposed DEA models, which differ in the way the ethical objective is taken into account. The paper by Guo, Ma, Zhou [17] used the input-oriented BCC model to evaluate the performance of 27 open-end funds in the 2010, and took into account the investment cost and moments of higher order.…”