A Multicriteria Decision Making Approach to Performance Evaluation of Mutua Funds: A Case Study in Serbia

Abstract

This paper evaluates the performance of nine mutual funds in the Republic of Serbia in the period 2011-2013, through the integration of traditional approaches for measuring absolute efficiency and the selected methods for measuring relative efficiency. The aim of the research is to measure and evaluate the performance of mutual funds in order to test the selection ability of Serbian portfolio managers. Performance evaluation of investment funds is by its nature a complex problem of multi-criteria decision-making and must be solved through the methods of at least the same level of complexity. The paper is structured as follows: first, the risk-weighted returns of mutual funds are compared with the risk-weighted return of the leading Belgrade Exchange Index, BELEX15, based on the following performance measures: Sharpe index ( ), Treynor index ( ), and Jensen’s alpha index ( ). Then, using the multicriteria decision making methods (AHP, DEA, and DEAHP), the performance evaluation of the selected funds is carried out. The research results indicate that mutual funds have inferior performance, which confirms the lack of selection abilities of national portfolio managers.