Performance Evaluation Of Mutual Funds

A mutual fund is an investment approach in which a pool of funds raised from many investors is used to invest in many markets such as the stock market,bond market,or money market.The mutual fund market is developing rapidly since the appearance of the first domestic mutual funds in 2001.According to the Thomson Reuters Lipper statistics,the number of mutual funds in China reached 830 in 2015,which is almost twice that in 2014.So it is essential to propose suitable approaches to evaluate the efficiencies of mutual funds.However,most of the current researches generally focus on finding proper indicator systems and regard mutual funds as black boxes when evaluating those using traditional data envelopment analysis(DEA)models.Few published papers have paid attention to the complicated internal processes of the black boxes.In this paper,the mutual fund is regarded as a two-stage system in which the first stage is the financing process and the second stage is the portfolio process.In addition,the portfolio process in the second stage is further decomposed as three parallel subunits,with each subunit representing an investment area.To measure the efficiencies of the mutual funds,firstly,a two-stage DEA model is proposed to obtain the overall efficiencies of the mutual funds.Secondly,an efficiency decomposition model is presented to determine the efficiencies of the two stages and the subunits.This approach can not only measure the overall efficiencies of the two-stage structure mutual funds but also has the ability of decomposing the main result into efficiencies for the two stages and subunits of the mutual funds.Finally,the proposed approach is applied in an empirical efficiency analysis study of 84 mutual funds in the Chinese mutual fund market in 2015.The results show that stock funds performed the best among the basic types of mutual funds.