Best-performing US mutual fund families from 1993 to 2008: Evidence from a novel two-stage DEA model for efficiency decomposition

I.M. Premachandra, Joe Zhu, John Watson () and Don Galagedera

Journal of Banking & Finance, 2012, vol. 36, issue 12, 3302-3317

Abstract: When analyzing relative performance, especially at the institutional level, the traditional data envelopment analysis (DEA) models do not recognize vastly different and important activities as separate functions and therefore cannot identify which function may be the main source of inefficiency. We propose a novel two-stage DEA model that decomposes the overall efficiency of a decision-making unit into two components and demonstrate its applicability by assessing the relative performance of 66 large mutual fund families in the US over the period 1993–2008. By decomposing the overall efficiency into operational management efficiency and portfolio management efficiency components, we reveal the best performers, the families that deteriorated in performance, and those that improved in their performance over the sample period. We also make frontier projections for poorly performing mutual fund families and highlight how the portfolio managers have managed their funds relative to the others during financial crisis periods.

Keywords: Data envelopment analysis efficiency decomposition; Operational management efficiency; Portfolio management efficiency; Efficiency of mutual fund families (search for similar items in EconPapers)
JEL-codes: C67 G10 G11 G20 (search for similar items in EconPapers)
Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (40)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:36:y:2012:i:12:p:3302-3317

DOI: 10.1016/j.jbankfin.2012.07.018

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