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Productivity and Efficiency Evaluation of US Mutual Funds

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  • Mohammad Reza TAVAKOLI BAGHDADABAD

    (National University of Malaysia)

  • Afsaneh NOORI HOUSHYAR

    (National University of Malaysia)

Abstract

In this paper assess the relative performance of US mutual funds using a non-parametric method such as data envelopment analysis (DEA). In particular, we assess the changes of mutual funds’ total productivity using the DEA-based Tornqvist productivity Index. The findings show significant losses in mutual funds’ productivity over the period 2000–2012, which has attracted the attention of US market regulators and policymakers. This paper presents some significant and important implications because we introduce the potential sources of operational inefficiency and unproductiveness. Using a panel logit model, it is revealed that a significant negative relationship exists between the efficiency and productivity and the size and management fee of mutual funds, a result that may be associated with the microstructure of the US stock market. Moreover, it is found that there is a significant positive relationship between the efficiency and productivity and the age and incentive fee of mutual funds. Average productivity growth in the US mutual fund industry is equal to 0.98, which hints at its unsatisfactory performance over the studied period. Finally, we present the findings versus the notion of the mean-variance (MV) efficiency of mutual funds.

Suggested Citation

  • Mohammad Reza TAVAKOLI BAGHDADABAD & Afsaneh NOORI HOUSHYAR, 2014. "Productivity and Efficiency Evaluation of US Mutual Funds," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 64(2), pages 120-143, March.
    • Handle: RePEc:fau:fauart:v:64:y:2014:i:2:p:120-143
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    References listed on IDEAS

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    2. Antonella Basso & Stefania Funari, 2017. "The role of fund size in the performance of mutual funds assessed with DEA models," The European Journal of Finance, Taylor & Francis Journals, vol. 23(6), pages 457-473, May.
    3. Sevgi Eda Tuzcu & Emrah Ertugay, 2020. "Is size an input in the mutual fund performance evaluation with DEA?," Eurasian Economic Review, Springer;Eurasia Business and Economics Society, vol. 10(4), pages 635-659, December.

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    More about this item

    Keywords

    data envelopment analysis (DEA); Tornqvist productivity index; technological efficiency; technical efficiency; mutual funds;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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