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A new network DEA model for mutual fund performance appraisal: An application to U.S. equity mutual funds

Author

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  • Galagedera, Don U.A.
  • Roshdi, Israfil
  • Fukuyama, Hirofumi
  • Zhu, Joe

Abstract

Mutual fund is a popular investment vehicle for investors. Investors usually judge fund manager performance relative to target benchmarks. Fund managers, on the other hand, are interested in knowing how/why they perform well or poorly relative to their peers in different aspects of fund management as well. To acquire more insights about this issue and design a comprehensive performance measure, fund management function is conceptualised as a three-stage production process. To assess overall and stage-level performance, a network data envelopment analysis model is developed. The stage-level processes are deemed to operate under two different environmental conditions—levels of risk exposure. Operation under different levels of risk exposure is modelled through conditions imposed on the intermediate measures. A new index proposed to assess linkage performance is demonstrated empirically to improve discriminatory power of performance. Further applications of the proposed model are discussed.

Suggested Citation

  • Galagedera, Don U.A. & Roshdi, Israfil & Fukuyama, Hirofumi & Zhu, Joe, 2018. "A new network DEA model for mutual fund performance appraisal: An application to U.S. equity mutual funds," Omega, Elsevier, vol. 77(C), pages 168-179.
    • Handle: RePEc:eee:jomega:v:77:y:2018:i:c:p:168-179
    DOI: 10.1016/j.omega.2017.06.006
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    References listed on IDEAS

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