Abstract
In finance, portfolio performance assessment is an important area of research. The two popular indices of performance are the Jensen's alpha and the Sharpe index. However there are a number of shortcomings of the above measures that have been highlighted in the literature. We propose a new measure of performance that seeks to address the limitations of the earlier indices. The new index is calculated by employing a well known method in operations research called data envelopment analysis. We show the benefits of the proposed approach and assess the performance of mutual funds. We compare the results with traditional indices of performance. An interesting result we obtain is that the mutual funds are all approximately mean-variance efficient.
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