NEW DEA PERFORMANCE EVALUATION INDICES AND THEIR APPLICATIONS IN THE AMERICAN FUND MARKET

Ruiyue Lin () and Zhiping Chen
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Ruiyue Lin: Faculty of Mathematics and Information Science, Wenzhou University, Wenzhou, Zhejiang Province, China
Zhiping Chen: Faculty of Science, Xi'an Jiaotong University, Xi'an, Shaanxi Province, China

Asia-Pacific Journal of Operational Research (APJOR), 2008, vol. 25, issue 04, 421-450

Abstract: The data envelopment analysis (DEA) method is a mathematical programming approach to evaluate the relative performance of portfolios. Considering that the risk input indicators of existing DEA performance evaluation indices cannot reflect the pervasive fat tails and asymmetry in return distributions of mutual funds, we originally introduce new risk measures CVaR and VaR into inputs of relevant DEA indices to measure relative performance of portfolios more objectively. To fairly evaluate the performance variation of the same fund during different time periods, we creatively treat them as different decision making units (DMUs). Different from available DEA applications which mainly investigate the American mutual fund performance from the whole market or industry aspect, we analyze in detail the effect of different input/output indicator combinations on the performance of individual funds. Our empirical results show that VaR and CVaR, especially their combinations with traditional risk measures, are very helpful for comprehensively describing return distribution properties such as skewness and leptokurtosis, and can thus better evaluate the overall performance of mutual funds.

Keywords: Data envelopment analysis; performance evaluation; mutual funds; risk measure; return (search for similar items in EconPapers)
Date: 2008
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Citations: View citations in EconPapers (3)

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DOI: 10.1142/S0217595908001882

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