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Mutual funds performance appraisal using stochastic multicriteria acceptability analysis

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  • Babalos, Vassilios
  • Philippas, Nikolaos
  • Doumpos, Michael
  • Zompounidis, Constantin

Abstract

Mutual fund investors are concerned with the selection of the best fund in terms of performance among the set of alternative funds. This paper proposes an innovative mutual funds performance evaluation measure in the context of multicriteria decision making. We implement a multicriteria methodology using stochastic multicriteria acceptability analysis, on Greek domestic equity funds for the period 2000–2009. Combining a unique dataset of risk-adjusted returns such as Carhart’s alpha with funds’ cost variables,we obtain a multicriteria performance evaluation and ranking of the mutual funds, by means of an additive value function model. The main conclusion is that among employed variables, the sophisticated Carhart’s alpha plays the most important role in determining fund rankings. On the other hand, funds’ rankings are affected only marginally by operational attributes. We believe that our results could have serious implications either in terms of a fund rating system or for constructing optimal combinations of portfolios.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 37953.

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Date of creation: 2011
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Handle: RePEc:pra:mprapa:37953

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Keywords: Mutual funds; Performance appraisal; Multicriteria analysis Simulation;

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Cited by:
  1. Constantin Zopounidis & Michael Doumpos, 2013. "Rejoinder on: Multicriteria decision systems for financial problems," TOP: An Official Journal of the Spanish Society of Statistics and Operations Research, Springer, vol. 21(2), pages 282-286, July.

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