A Data Envelopment Analysis Approach To Measure The Mutual Fund Performance

As a new type financial tool, security fund is a method of investment thatcharacteristic of collective investing,expert operating and risk and benefit sharing.Investment Fund has become an important investment tool throughout the world. From thetrend of fund development, mutual fund is the mainstream. Although the development ofcollective investing in China has a high speed and positive effect for securities business,there still have so many problems that in dire need of solve. One of them is theperformance evaluation of fund. The performance of security investment funds not onlyreflects fiduciary duty, but also offers useful decision-making information. It is a manualfor fund manager and a guide for fund investors. It is very important for the development offund industry and the whole security market. Accordingly, as for investors, performanceevaluation of funds is the same important. Performance evaluation of funds is not a methodto evaluate the value of investment management but also a feedback mechanism to improvethe investment management. It is an important link of the development of fund industry. Atpresent, since, our current fund market is in its primary phase, the research and practice offund valuation are in the bud and there has no evaluation of our own. And the evaluationitems mainly focus on rate of net growth. Though some of researchers already take risk intoconsideration, take Jensen index for example, the input variables also be restricted.DEA is a function that contains much more variables which will be debate in thefollowing text. It takes many evaluation indexes into consideration, including managementfees, risk of investment and risk of market. It can avoid not only the discrepancy ofevaluation caused by the different choice of fiduciary, but also the influence of the entiresecurity market, economics environment law environment and politics environment bycomparing the all funds via setting frame of reference by itself. We an make projectionanalyze,to seek the reason and estimate the extent of the bad performance.The whole paper includes five parts, the first part is a brief introduction on the basicconception. The second part comes the overview of the history of the system of the fundperformance evaluation. In the third part there is a detail introduction on general principleof DEA method, and also a comparation between the method and the former evaluationsystem. The forth part is the core content of the paper, through the actual analyze, we can get a clear idea on the difference of the different index, and the advantage of the DEAmethod can be approved. After projection analysis, we also can find the improve point ofeach fund. The last part is the suggestion on evaluation and management of the fundaccording the result of the forth part.