A trade-level DEA model to evaluate relative performance of investment fund managers

Rajiv Banker, Janice Y.S. Chen and Paul Klumpes

European Journal of Operational Research, 2016, vol. 255, issue 3, 903-910

Abstract: We develop a trade-level measure to evaluate fund managers’ efficiency in their buying and selling activities relative to the trades of other fund managers. We customize an additive Data Envelopment Analysis (DEA) model to focus on risk-adjusted returns during different time periods as trade-level outcomes. The model does not consider any input–output process. Instead, it considers tradeoffs between multiple outcomes. We find that fund managers do not have symmetric ability in buying and selling. Some managers do well in buy transactions but not in sell transactions while others perform well in selling but not in buying. We also explore the determinants of fund managers’ trading performance. Compared to trade characteristics, portfolio characteristics have a greater influence in explaining fund managers’ relative trading efficiency.

Keywords: Fund manager performance; Data envelopment analysis; Trade characteristics; Portfolio characteristics (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ejores:v:255:y:2016:i:3:p:903-910

DOI: 10.1016/j.ejor.2016.05.056

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