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Mutual funds performance appraisal using stochastic multicriteria acceptability analysis

Vassilios Babalos, Nikolaos Philippas (), Michael Doumpos and Constantin Zompounidis

MPRA Paper from University Library of Munich, Germany

Abstract: Mutual fund investors are concerned with the selection of the best fund in terms of performance among the set of alternative funds. This paper proposes an innovative mutual funds performance evaluation measure in the context of multicriteria decision making. We implement a multicriteria methodology using stochastic multicriteria acceptability analysis, on Greek domestic equity funds for the period 2000–2009. Combining a unique dataset of risk-adjusted returns such as Carhart’s alpha with funds’ cost variables,we obtain a multicriteria performance evaluation and ranking of the mutual funds, by means of an additive value function model. The main conclusion is that among employed variables, the sophisticated Carhart’s alpha plays the most important role in determining fund rankings. On the other hand, funds’ rankings are affected only marginally by operational attributes. We believe that our results could have serious implications either in terms of a fund rating system or for constructing optimal combinations of portfolios.

Keywords: Mutual funds; Performance appraisal; Multicriteria analysis Simulation (search for similar items in EconPapers)
JEL-codes: G11 G23 C02 G10 (search for similar items in EconPapers)
Date: 2011
New Economics Papers: this item is included in nep-cmp and nep-fmk
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Citations: View citations in EconPapers (6) Track citations by RSS feed

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https://mpra.ub.uni-muenchen.de/42051/1/MPRA_paper_42051.pdf revised version (application/pdf)

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