Mutual Fund Industry Performance: A Network Data Envelopment Analysis Approach

The objective of this chapter is twofold. First, we present a comprehensive review of the DEA literature that has evaluated mutual fund performance. Second, we present a two-stage DEA model that decomposes the overall efficiency of a decision-making unit into two components and demonstrate its applicability by assessing the relative performance of 66 large mutual fund families in the US over the period 1993–2008. By decomposing the overall efficiency into operational management efficiency and portfolio management efficiency components, we reveal the best performers, the families that deteriorated in performance, and those that improved in their performance over the sample period. We also make frontier projections for poorly performing mutual fund families and highlight how the portfolio managers have managed their funds relative to the others during financial crisis periods.

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