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Volume 64, Issue 2

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Productivity and Efficiency Evaluation of US Mutual Funds

Noori Houshyar, Afsaneh; Tavakoli Baghdadabad, Mohammad Reza

Year: 2014   Volume: 64   Issue: 2   Pages: 120-143

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.

JEL classification: G14, G15, L10, O47

Keywords: data envelopment analysis (DEA), Tornqvist productivity index, technological efficiency, technical efficiency, mutual funds

RePEc: http://ideas.repec.org/a/fau/fauart/v64y2014i2p120-143.html

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