Abstract

In this article, we analyze the market efficiency of the mutual fund industry around the world in short-term mutual fund performance. Employing a unique database of worldwide domestic equity funds; we use parametric and non-parametric evaluation where a relation between benefit (output measure) and cost (input variables) is established. We find a statistically significant negative relationship between risk-adjusted performance and expenses across countries. However, we reexamine this negative relation with a non-parametric Data Envelopment Analysis (DEA). In contrast to our previous result, using DEA we show strong evidence that equity mutual funds around the world are approximately mean-variance efficient. Thus, DEA confirms the mean variance efficiency theory.

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