Can Efficiency of Returns Be Considered as a Pricing Factor?
J. Francisco Rubio (),
Neal Maroney and
M. Kabir Hassan ()
Additional contact information
J. Francisco Rubio: Central Connecticut State University
Neal Maroney: Central Connecticut State University
Computational Economics, 2018, vol. 52, issue 1, 25-54
Abstract We add to the investments literature by employing new techniques to estimate asset performance. We estimate a data envelopment analysis based efficiency score that allows for direct comparison between ex-post efficiency rankings and test the ex-ante relevance of such scores by including them into asset pricing models. We find that knowing the fund efficiency score can help explain time-series returns. When efficiency is included in an asset pricing model, the absolute value of the average mispricing error is decreased, which we take as evidence of the explanatory power of efficiency scores. But more importantly, we show that efficacy scores can be used as next period predictors of stock returns. In addition, we further use the efficiency scores to differentiate between the performance of constrained and unconstrained investment assets, as in the case of socially responsible investments. Our findings give robustness to the literature on constrained investments showing significant underperformance of socially and responsible investments.
Keywords: Mutual funds; Performance; Data envelopment analysis; DEA; Risk factors; SRI; Ethical investing (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
http://link.springer.com/10.1007/s10614-017-9647-y Abstract (text/html)
Access to the full text of the articles in this series is restricted.
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:kap:compec:v:52:y:2018:i:1:d:10.1007_s10614-017-9647-y
Ordering information: This journal article can be ordered from
http://www.springer. ... ry/journal/10614/PS2
Access Statistics for this article
Computational Economics is currently edited by Hans Amman
More articles in Computational Economics from Springer, Society for Computational Economics Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla ().