The efficiency of mutual funds

Javier Vidal-García (), Marta Vidal (), Sabri Boubaker and Majdi Hassan ()
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Javier Vidal-García: Universidad de Valladolid
Marta Vidal: Universidad Complutense de Madrid
Majdi Hassan: École Supérieure des Sciences Economiques et Commerciales de Tunis (ESSEC Tunis)

Annals of Operations Research, 2018, vol. 267, issue 1, No 27, 555-584

Abstract: Abstract This paper analyzes the short-term market efficiency of the mutual fund industry around the world. Using a unique database of worldwide domestic equity funds, it employs a parametric (regression model) and non-parametric (data envelopment analysis (DEA) model) approaches to establish a relation between cost (expense ratio, turnover, loads, and risk) and benefit (return) of mutual funds. The empirical results of the parametric approach show a statistically significant negative relationship between expenses and risk-adjusted performance across countries. When we reexamine this relationship using a non-parametric approach, we show, in contrast to our previous result, a positive relationship between expenses and risk-adjusted performance. Thus, using the DEA methodology, we find strong evidence that equity mutual funds around the world are approximately mean–variance efficient.

Keywords: Mutual funds; Portfolio efficiency; Data envelopment analysis; Multiple criteria decision (search for similar items in EconPapers)
JEL-codes: G11 G12 (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (17)

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DOI: 10.1007/s10479-017-2429-z

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