Rating Mutual Funds Through an Integrated DEA-Based Multicriteria Performance Model: Design and Information Content

Technical University of Crete, Financial Engineering Laboratory, Working Paper 2012.06

41 Pages Posted: 4 Oct 2012

See all articles by Vassilios Babalos

Vassilios Babalos

Department of Accounting & Finance, Technological Educational Institute of Peloponnese; University of Piraeus - Department of Banking and Financial Management

Michael Doumpos

Technical University of Crete (TUC) - Department of Production Engineering and Management

Nikolaos Philippas

University of Piraeus - Department of Business Administration

C. Zopounidis

Technical University of Crete (TUC) - Department of Production Engineering and Management

Date Written: October 3, 2012

Abstract

There is a growing literature that employs nonparametric frontier methods in order to evaluate the performance of investment funds. This paper proposes an integrated approach for analyzing the efficiency and performance of mutual funds. The methodology combines data envelopment analysis (DEA) with a multicriteria decision aid (MCDA) methodology. DEA is employed to assess the relative efficiency of mutual funds in terms of their return, size, gross expense ratio, turnover rate, and risk. In a second stage, a multicriteria approach is employed to develop an overall performance measure on the basis of the DEA efficiency results. The resulting model evaluates all mutual funds in a common basis and enables comparisons over time. The methodology is applied on a large sample of more than 500 US mutual funds over the period 2003-2010. The analysis is implemented under three different time-window periods (one, three, and five year evaluations) and the results are compared against the fund ratings provided by Morningstar.

Keywords: Mutual funds, Performance appraisal, Multicriteria analysis, Data envelopment analysis, Efficiency

JEL Classification: G11, C61, C67, C44

Suggested Citation

Babalos, Vassilios and Doumpos, Michael and Philippas, Nikolaos and Zopounidis, Constantin, Rating Mutual Funds Through an Integrated DEA-Based Multicriteria Performance Model: Design and Information Content (October 3, 2012). Technical University of Crete, Financial Engineering Laboratory, Working Paper 2012.06, Available at SSRN: https://ssrn.com/abstract=2156222 or http://dx.doi.org/10.2139/ssrn.2156222

Vassilios Babalos

Department of Accounting & Finance, Technological Educational Institute of Peloponnese ( email )

Antikalamos
Kalamata, KALAMATA 24100
Greece

HOME PAGE: http://www.teikal.gr

University of Piraeus - Department of Banking and Financial Management ( email )

80 Karaoli & Dimitriou Str.
18534 Piraeus, 185 34 -GR
Greece

Michael Doumpos (Contact Author)

Technical University of Crete (TUC) - Department of Production Engineering and Management ( email )

University Campus
Chania
Crete, 73100
Greece
+30 28210 37318 (Phone)
+30 28210 69410 (Fax)

Nikolaos Philippas

University of Piraeus - Department of Business Administration ( email )

80, Karaoli & Dimitriou, Piraueus
Athens, 18534
Greece

Constantin Zopounidis

Technical University of Crete (TUC) - Department of Production Engineering and Management ( email )

University Campus
Chania
Crete, 73100
Greece
+30 28210 37236 (Phone)
+30 28210 69410, 37236 (Fax)

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