Efficiency of mutual funds and portfolio performance measurement: A non-parametric approach

Murthi, B. P. S.; Choi, Yoon Jung; Desai, Preyas S.

doi:10.1016/s0377-2217(96)00356-6

Cited by 288 publications

(244 citation statements)

References 24 publications

Supporting

Mentioning

228

Contrasting

Unclassified

Order By: Relevance

“…The first application of DEA to mutual funds was performed by Murthi et al (1997), who examined the efficiency of 2,083 mutual funds in 1993. Their motivation to use DEA was to overcome a number of shortcomings of classic two-dimensional performance measures.…”

Section: Introductionmentioning

confidence: 99%

“…Basso and Funari (2001) measured the efficiency of 47 mutual funds between 1997 and 1999. Their contribution was to develop a generalized DEA-based performance measure that can integrate both classic performance measures (as Sharpe, Treynor, and Jensen) and the approach of Murthi et al (1997). Additional applications of DEA for measuring mutual fund performance are McMullen and Strong (1998), Bowlin (1998), Morey and Morey (1999), and Choi and Murthi (2001).…”

Section: Introductionmentioning

confidence: 99%

See 1 more Smart Citation

Performance measurement of hedge funds using data envelopment analysis

Eling

2006

Fin Mkts Portfolio Mgmt

View full text Add to dashboard Cite

Data envelopment analysis (DEA) is a nonparametric method from the area of operations research that measures the relationship of produced outputs to assigned inputs and determines an efficiency score. This efficiency score can be interpreted as a performance measure in investment analysis. Recent literature contains intensive discussion of using DEA to measure the performance of hedge funds, as this approach yields some advantages compared to classic performance measures. This paper extends the current discussion in three aspects. First, we present different DEA models and analyze their suitability for hedge fund performance measurement. Second, we systematize possible inputs and outputs for DEA and again examine their suitability for hedge fund performance measurement. Third, two rules are developed to select inputs and outputs in DEA of hedge funds. Using this framework, we find a completely new ranking of hedge funds compared to classic performance measures and compared to previously proposed DEA applications. Thus, we propose that classic performance measures should be supplemented with DEA based on the suggested rules to fully capture hedge fund risk and return characteristics.

show abstract

Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Performance measurement of hedge funds using data envelopment analysis

Eling

2006

Fin Mkts Portfolio Mgmt

View full text Add to dashboard Cite

show abstract

“…From a theoretical point of view, Sengupta (1991) and Sengupta and Park (1993) provide links between the Capital Asset Pricing Model (CAPM) and nonparametric estimation of frontiers, whereas Briec and Kerstens (2010) analyze the relation between the hypothesis of the basic Markowitz (1952) model and efficiency analysis theory, by developing a dual framework for assessing the degree to which investors' preferences are satisfied. From a more applied perspective, the first specific application of DEA for evaluating the performance of mutual funds was Murthi et al (1997), whose main motivation was to overcome the shortcomings of the classical two dimensional (mean-variance) performance measures.…”

Section: Mutual Fund Evaluation Using Frontier Techniquesmentioning

confidence: 99%

“…return) and input (e.g., risk) are below the best practice frontier. Banker and Maindiratta (1986) Sharpe, Treynor, and Jensen) and the approach of Murthi et al (1997).…”

Section: Data Envelopment Analysis and Free Disposable Hullmentioning

confidence: 99%

“…The number of proposals, both from theoretical and empirical points of view, is now substantial, including Murthi et al (1997), McMullen and Strong (1998), Morey and Morey (1999), Wilkens and Zhu (2001), Basso and Funari (2001), or Choi and Murthi (2001), among others. Indeed, due to the now remarkable number of proposals, some initiatives have been taken to review early contributions, such as Eling (2006), Glawischnig and Sommersguter-Reichmann (2010), or the monograph by Gregoriou and Zhu (2005) in the specific fields of hedge fund and commodity trading advisor (CTAs) performance evaluation.…”

Section: Introductionmentioning

confidence: 99%

See 1 more Smart Citation

On the informativeness of persistence for evaluating mutual fund performance using partial frontiers

Matallín‐Sáez

Soler‐Domínguez

Tortosa‐Ausina

2014

Omega

View full text Add to dashboard Cite

The last few years have witnessed a rapid evolution in the literature evaluating mutual fund performance using frontier techniques. The instruments applied, mostly DEA (Data Envelopment Analysis) and, to a lesser extent, FDH (Free Disposal Hull), are able to encompass several dimensions of performance, but they also have some disadvantages that might be preventing a wider acceptance. The recently developed order-m and order-α partial frontiers overcome some of the disadvantages (they are robust with respect to extreme values and noise, and do not suffer from the well-known curse of dimensionality) while keeping the main virtues of DEA and FDH (they are fully-nonparametric). In this article we apply not only the non-convex counterpart of DEA (FDH) but also order-m and order-α partial frontiers to a sample of US mutual funds. The results obtained for both order-m and order-α are useful, since a full ranking of the mutual funds' performance can be obtained. We merge these methods with the literature on mutual fund performance persistence. By combining the two literatures we derive an algorithm which establishes how the choice of m and α parameters intrinsic to order-m and order-α (respectively) relate to the existence of performance persistence and the contrarian effect.

show abstract