Efficiency Persistence in Mutual Fund Performance
Posted: 10 Feb 2019
Date Written: January 30, 2019
This paper analyses the market efficiency persistence of the mutual fund industry around the world. With a large database of domestic equity funds across 35 countries, our study employs multifactor models and non-parametric methodology to examine fund efficiency across countries and its potential persistence. We employ the data envelopment analysis (DEA) technique to examine the relation between cost (input variables) and return (output measure). Using monthly returns, we find a strong evidence that equity mutual funds are approximately mean-variance efficient across countries. Mutual funds show strong evidence of significant efficiency persistence around the world on a monthly and annual basis. We conclude that efficiency persistence is indeed relevant and that the market values the ability of a fund manager to maintain an efficient portfolio.
Keywords: Mutual Funds, Portfolio Efficiency, Data Envelopment Analysis, Multiple Criteria Decision
JEL Classification: G11, G12
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