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Performance Evaluation of Mutual Funds: A Data Envelopment Analysis

Author

Listed:
  • Romana Bangash

    (Assistant Professor, Department of Management Sciences, Institute of Management Sciences, Peshawar, KP, Pakistan.)

  • Arif Hussain

    (Assistant Professor, IBL, Abdul Wali Khan University Mardan, Mardan, KP, Pakistan.)

  • Muhammad Hassan Azhar

    (MS Scholar (Management Sciences), Institute of Management Sciences, Peshawar, KP, Pakistan.)

Abstract

This study conducts a regression analysis between the efficiency scores and the explanatory variables. Data was collected for explanatory variables like age of the mutual fund, size of fund family, number of funds in funds family, and volatility (beta). As this study used input oriented model, mutual funds were categorized and relatively evaluated on the basis of similar outcomes and inputs charged. Out of 44 mutual funds understudy, only 7 of the mutual funds were cost efficient. This indicates that nearly 37 of the mutual funds under study have more costs associated to them as compared to the return they are offering to the investors. It has been safely assumed that all the mutual funds, which are below the efficiency frontier, should compare themselves with the industry benchmark efficient mutual funds. In order to make these inefficient mutual funds reach the optimum and higher efficiency score, the fund managers should check every input and determine the slack they can afford to reduce the input without reducing the output generating from it.

Suggested Citation

  • Romana Bangash & Arif Hussain & Muhammad Hassan Azhar, 2018. "Performance Evaluation of Mutual Funds: A Data Envelopment Analysis," Global Social Sciences Review, Humanity Only, vol. 3(2), pages 215-240, June.
    • Handle: RePEc:gss:journl:v:3:y:2018:i:2:p:215-240
    DOI: 10.31703/gssr.2018(III-II).14
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    References listed on IDEAS

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    1. Konstantina Pendaraki, 2012. "Mutual Fund Performance Evaluation using Data Envelopment Analysis with Higher Moments," Journal of Applied Finance & Banking, SCIENPRESS Ltd, vol. 2(5), pages 1-5.
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    4. Chandra Shekhar Bhatnagar & Riad Ramlogan, 2012. "The capital asset pricing model versus the three factor model: A United Kingdom Perspective," International Journal of Business and Social Research, MIR Center for Socio-Economic Research, vol. 2(1), pages 51-65, February.
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    6. Babalos, Vassilios & Philippas, Nikolaos & Doumpos, Michael & Zompounidis, Constantin, 2011. "Mutual funds performance appraisal using stochastic multicriteria acceptability analysis," MPRA Paper 37953, University Library of Munich, Germany.
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    Cited by:

    1. Muhammad Jam e Kausar Ali Asghar & Abdul Zahid Khan & Hafiz Ghufran Ali Khan, 2019. "Economies of Scale and Efficiency of Mutual Funds in Pakistan," Global Regional Review, Humanity Only, vol. 4(1), pages 96-103, March.

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    More about this item

    Keywords

    Performance Evaluation; Mutual Funds; Data Envelopment Analysis;
    All these keywords.

    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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