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Mathematics 2018, 6(9), 164; https://doi.org/10.3390/math6090164

Introducing Weights Restrictions in Data Envelopment Analysis Models for Mutual Funds

1
Department of Economics, Ca’ Foscari University of Venice, Cannaregio 873, 30121 Venice, Italy
2
Department of Management, Ca’ Foscari University of Venice, Cannaregio 873, 30121 Venice, Italy
These authors contributed equally to this work.
*
Author to whom correspondence should be addressed.
Received: 14 August 2018 / Revised: 1 September 2018 / Accepted: 3 September 2018 / Published: 10 September 2018
(This article belongs to the Special Issue Financial Mathematics)
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Abstract

Data envelopment analysis has been applied in a number of papers to measure the performance of mutual funds, besides a great many applications on the more diverse fields of performance evaluation. The data envelopment analysis models proposed in the mutual funds literature do not generally set restrictions on the weights assigned to the input and output variables. In this paper, we study the effects of the introduction of different weight restrictions on the results of the performance evaluation of mutual funds. In addition, we provide a unified matrix representation for three widely used approaches on weight restrictions: virtual weight restrictions with constraints on all decision-making units (DMUs) (on all funds); virtual weight restrictions with constraints only on the target unit; assurance regions. Using the unified matrix representation of the weights constraints, we formulate the data envelopment analysis (DEA ) efficiency model and express the efficient frontier in a unified way for the different weight restrictions considered. We investigate the effects of the different weight restrictions on the performance evaluation by means of an empirical application on a set of European mutual funds. Moreover, we study the behaviour of the fund performance scores as the restrictions on the weights become increasingly strict. View Full-Text
Keywords: mutual fund performance evaluation; data envelopment analysis (DEA); virtual weight restrictions; assurance regions mutual fund performance evaluation; data envelopment analysis (DEA); virtual weight restrictions; assurance regions
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This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited. (CC BY 4.0).
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Basso, A.; Funari, S. Introducing Weights Restrictions in Data Envelopment Analysis Models for Mutual Funds. Mathematics 2018, 6, 164.

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