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Mutual Fund Performance and Persistence in Taiwan: A Non-Parametric Approach

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  • Chi-Sheng Hsu
  • Jwu-Rong Lin

Abstract

This paper applies data envelopment analysis (DEA) to measure the performance of Taiwan domestic equity funds during the period 1999 to 2003. To test performance persistence, we first divide the sample funds into low efficiency (0--25th percentile), middle efficiency (26th--75th percentile), and high efficiency (76th--100th percentile) groups according to their rankings on technical efficiency (TE) and Sharpe ratios, respectively. Then, based on the previous one-, two-, and three-year performances of the sample funds, we employ iterative seemingly unrelated regressions to analyse the persistence of sample fund performance. The results show that there exists a significant ‘hot hands’ effect in Taiwan domestic equity funds under the TE measure, but not under the measure of Sharpe ratios. The paper concludes that the different results in performance persistence analyses between the above two measures is driven by the DEA taking transaction costs into consideration.

Suggested Citation

  • Chi-Sheng Hsu & Jwu-Rong Lin, 2007. "Mutual Fund Performance and Persistence in Taiwan: A Non-Parametric Approach," The Service Industries Journal, Taylor & Francis Journals, vol. 27(5), pages 509-523, July.
    • Handle: RePEc:taf:servic:v:27:y:2007:i:5:p:509-523
    DOI: 10.1080/02642060701411658
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    Cited by:

    1. Olkis, Christopher & Brandani, Stefano & Santori, Giulio, 2019. "Design and experimental study of a small scale adsorption desalinator," Applied Energy, Elsevier, vol. 253(C), pages 1-1.
    2. Y Ito & S Managi & A Matsuda, 2013. "Performances of socially responsible investment and environmentally friendly funds," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 64(11), pages 1583-1594, November.
    3. Lu, Wen-Min & Liu, John S. & Kweh, Qian Long & Wang, Chung-Wei, 2016. "Exploring the benchmarks of the Taiwanese investment trust corporations: Management and investment efficiency perspectives," European Journal of Operational Research, Elsevier, vol. 248(2), pages 607-618.
    4. Panayotis Alexakis & Ioannis Tsolas, 2011. "Appraisal of Mutual Equity Fund Performance Using Data Envelopment Analysis," Multinational Finance Journal, Multinational Finance Journal, vol. 15(3-4), pages 273-296, September.

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