Section 3 analyzes Ethical mutual funds performance consequences on DEA modeling of the presence of negative values in an output variable. A data envelopment analysis approach to measure the mutual fund performance.
The last column of table 2 shows the DEA performance measure obtained by all the funds analyzed. Past performance may or may not be sustained in future and is no indication of future performance.
With regard to this, it is important to observe that the ethical level is usually chosen by investors a priori and cannot be arbitrarily worsened. The rate of returns and the volatilities of the funds have been computed on an annual base; the input and output data are reported in table 2 as per cent values, with an initial invested capital set equal to for all investments.
However, this is not what happens with the DEA model. In a DEA model, it is known that the solution provides a virtual unit which represents an efficient benchmark for an inefficient unit see e. Morningstar India Private Limited, its affiliates, and their officers, Ethical mutual funds performance and employees shall not be responsible or liable for any trading decisions, damages or other losses resulting from, or related to, the Star Rating, or the mutual fund schemes featured herein, or their use.
On the whole, the set is made up of 59 DMUs. The selection can be carried out either with a negative screening, by excluding from the portfolios the assets of the companies with a profile that is bad for socially responsible criteria, or with a positive screening, by including in the portfolio investments in companies which are selected on the ground of their ethically and socially behaviour.
This means that the efficiency measure of U 4 is the same for all values of the negative input, independently of the actual value taken, and thus the value of the second output and that of the input is the only thing that matters.
To this aim, we may explicitly impose in the DEA optimization model the constraint that the ethical level of a virtual unit is not lower than the ethical level of the fund under evaluation. Indeed, when some output variables may take negative values, the DEA performance measure may give non satisfactory results, as will be highlighted in next section.
Actually, if the first output represents the average rate of return of the mutual fund and the second output is an indicator of its ethical level, this entails that when the average rate of return is negative, its value is indifferent for investors, wether it is only slightly less than zero or imply a heavy loss: However, the DEA approach requires the assumption that all the input and output values are non negative, while in slump periods of the business cycle, the average rate of return of most stocks, and thus that of most mutual funds, is negative.
This virtual unit suggests that the inefficient unit U 2 might improve its output values while keeping the input value fixed, by moving along the dashed line OP 2 towards the efficient frontier, till its reaches efficiency. I fondi comuni di investimento etici in Italia e la valutazione della performance.
In this paper we tackle the problem of the presence of negative average rate of returns in the computation of the performance of ethical mutual funds.
Morningstar India Private Limited; Regd. Units invariant and translation invariant DEA models. Actually, if we use in the analysis as return indicator the average excess return observed in the period considered, its value is negative for all funds which obtain a rate of return lower than the riskless interest rate.
An ethical measure defined in the real interval [0, L] can be computed as follows:by comparing the financial and ethical performance of mutual funds. Relative to existing studies, which analyze small samples of ethical funds, we are able to perform this analysis on large samples, including conventional funds.
Indeed, our measure allows the determination of ethical performance not. 22 Antonella Basso and Stefania Funari Choi and Desai , Morey and Morey , Basso and Funari ,  and some generalizations to the measurement of the performance of ethical mutual funds. Performance evaluation of ethical mutual funds in slump periods Antonella Basso and Stefania Funari Dipartimento di Matematica Applicata Dorsoduro /E, Venezia, Italy.
Performance evaluation of ethical mutual funds in slump periods Antonella Basso and Stefania Funari Dipartimento di Matematica Applicata Università Ca Foscari di Venezia Dorsoduro /E, Venezia.
One of the significant developments in the investing community is the rise of socially responsible or ethical investments during last two decades. Because of the increasing size and importance of ethical mutual funds, this paper seeks to evaluate and compare the performance of ethical mutual funds.
Prices & Performance. © Copyright Northwest & Ethical Investments L.P. All rights reserved. | Northwest Funds, NEI Investments and Ethical Funds are divisions.Download