Data Envelopment Analysis of Morningstar's Small-Cap Mutual Funds

Abstract

Data Envelopment Analysis (DEA) is applied to the Morningstar 500's small-cap mutual funds to identify those that are efficient or inefficient in a production theory sense. That is, this study examines the efficiency of mutual fund portfolio management, rather than the typical analysis of fund performance. In addition, the descriptive variables—investment style attributes—that differ significantly between efficient and inefficient funds are identified, and the nature of these relationships examined. This study follows Haslem and Scheraga (2003) that applied DEA to Morningstar's large-cap funds.