The Efficiency of Mutual Funds

43 Pages Posted: 19 Apr 2016 Last revised: 4 Aug 2018

See all articles by Javier Vidal-García

Javier Vidal-García

Harvard University; Complutense University Madrid

Marta Vidal

Universidad Europea de Madrid; Universidad Complutense de Madrid (UCM)

Sabri Boubaker

South Champagne Business School; University Paris-Est Créteil (UPEC) - Institut de Recherche en Gestion

Majdi Hassan

ESSEC Tunis

Date Written: November 17, 2016

Abstract

This paper analyzes the short-term market efficiency of the mutual fund industry around the world. Using a unique database of worldwide domestic equity funds, it employs a parametric (regression model) and non-parametric (Data Envelopment Analysis (DEA) model) approaches to establish a relation between cost (expense ratio, turnover, loads, and risk) and benefit (return) of mutual funds. The empirical results of the parametric approach show a statistically significant negative relationship between expenses and risk-adjusted performance across countries. When we reexamine this relationship using a non-parametric approach, we show, in contrast to our previous result, a positive relationship between expenses and risk-adjusted performance. Thus, using the DEA methodology, we find strong evidence that equity mutual funds around the world are approximately mean-variance efficient.

Keywords: Mutual Funds, Portfolio Efficiency, Factor Models, Data Envelopment Analysis

JEL Classification: G11, G12

Suggested Citation

Vidal-García, Javier and Vidal, Marta and Boubaker, Sabri and Hassan, Majdi, The Efficiency of Mutual Funds (November 17, 2016). Annals of Operation Research, August 2018, Volume 267, Issue 1–2, pp 555–584.. Available at SSRN: https://ssrn.com/abstract=2765878 or http://dx.doi.org/10.2139/ssrn.2765878

Javier Vidal-García (Contact Author)

Harvard University ( email )

1875 Cambridge Street
Cambridge, MA 02138
United States

Complutense University Madrid ( email )

School of Business Administration
Somosaguas Campus
Madrid, Madrid 28223
Spain

Marta Vidal

Universidad Europea de Madrid ( email )

Villaviciosa de Odón
Madrid, 28670
Spain

Universidad Complutense de Madrid (UCM) ( email )

Somosaguas Campus
Madrid, 28223
Spain

Sabri Boubaker

South Champagne Business School ( email )

217 avenue Pierre Brossolette BP 710
Troyes, Troyes 10002
France
+33 3 25 71 22 31 (Phone)
+33 3 25 49 22 17 (Fax)

HOME PAGE: http://www.get-formation.fr/chercheurs/sabri-boubaker

University Paris-Est Créteil (UPEC) - Institut de Recherche en Gestion ( email )

61 Avenue du General de Gaulle
94010 Creteil
France

HOME PAGE: http://www.irg.u-pec.fr/enseignant.php?num=58

Majdi Hassan

ESSEC Tunis ( email )

4, Rue Abou Zakaria
Tunis
Tunisia

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