Data envelopment analysis has been applied in a number of papers to measure the performance of mutual funds, besides a great many applications on the more diverse fields of performance evaluation. The data envelopment analysis models proposed in the mutual funds literature do not generally set restrictions on the weights assigned to the input and output variables. In this paper we study the effects of the introduction of different weights restrictions on the results of the performance evaluation of mutual funds. In addition, we provide a unified matrix representation for three widely used approaches on weights restrictions: virtual weights restrictions with constraints on all decision making units (on all funds); virtual weights restrictions with constraints only on the target unit; assurance regions. Using the unified matrix representation of the weights constraints, we formulate the DEA efficiency model and express the efficient frontier in a unified way for the different weights restrictions considered. We investigate the effects of the different weights restrictions on the performance evaluation by means of an empirical application on a set of European mutual funds. Moreover, we study the behaviour of the fund performance scores as the restrictions on the weights become increasingly strict.

Introducing Weights Restrictions in Data Envelopment Analysis Models for Mutual Funds

Antonella Basso
;
Stefania Funari
2018-01-01

Abstract

Data envelopment analysis has been applied in a number of papers to measure the performance of mutual funds, besides a great many applications on the more diverse fields of performance evaluation. The data envelopment analysis models proposed in the mutual funds literature do not generally set restrictions on the weights assigned to the input and output variables. In this paper we study the effects of the introduction of different weights restrictions on the results of the performance evaluation of mutual funds. In addition, we provide a unified matrix representation for three widely used approaches on weights restrictions: virtual weights restrictions with constraints on all decision making units (on all funds); virtual weights restrictions with constraints only on the target unit; assurance regions. Using the unified matrix representation of the weights constraints, we formulate the DEA efficiency model and express the efficient frontier in a unified way for the different weights restrictions considered. We investigate the effects of the different weights restrictions on the performance evaluation by means of an empirical application on a set of European mutual funds. Moreover, we study the behaviour of the fund performance scores as the restrictions on the weights become increasingly strict.
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/10278/3703580
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