The purpose of our study is to evaluate the performance of mutual funds. ‘Treynor Ratio’, ‘Sharpe Ratio’, ‘Information Ratio’ and ‘Jensen’s Alpha’ are four commonly used indices for evaluating the competing mutual funds. However, it is not clear which measure is the most robust. This paper not only focuses on investigating the four indices (criteria) separately but also combining all the indices at the same time in making a final ranking of the mutual funds. In this work, the extended TOPSIS with four objective weighing choices under Minkowski’s Lλ metric with λ=2 (Euclidean) distance measure are adopted for the multi-criteria decision making. The aforementioned four usual indices and the extended TOPSIS with four choices of weight methods are then applied to evaluate the performance of 82 Taiwanese mutual funds for 34 consecutive months. Roughly speaking, all the indices perform pretty well in terms of Spearman’s rank correlation coefficient. Although multicriteria methods are not noticeably more accurate than uni-criteria methods, but it offers an alternative to whom wants to take all four criteria into consideration simultaneously.
Relation:
Journal of Statistics & Management Systems 10(6), pp.869-883
