Green exchange-traded fund performance appraisal using slacks-based DEA models

Ioannis E. Tsolas, Vincent Charles

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This paper appraises the performance of a sample of green exchange-traded funds (ETFs) using two types of data envelopment analysis (DEA) metrics. The first type is based on slacks-based DEA models, namely, the range-adjusted measure (RAM) and its variant the RAM-BCC model; the second type is based on a common set of weights of RAM. The appraisal is performed under the assumption that there are value stocks on the green equity market and the potential investors prefer ETFs that put emphasis on value stocks. In the first stage of the analysis, ETF efficiency ratings are derived, whereas in the second stage, ordinary least squares, censored Tobit, and bootstrapped-truncated regression are employed to model the fund ratings. The results are acceptable, indicating that four or five out of the sixteen sample funds depending on the model employed can be candidates for value investors. Moreover, although there is not much evidence for systematic effects of the beta coefficient on fund rating, the findings of the analyses entail implications for potential investors by using the models as an investment pick and for fund managers by considering the mitigation of risk and bringing higher selectivity to their portfolios.
Original languageSpanish
Pages (from-to)51-77
Number of pages27
JournalOperational Research
StatePublished - 1 Apr 2015

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