Browsing by Subject "Investment analysis"
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Item Evaluation and comparison of management strategies by Data Envelopment Analysis with an application to mutual funds(2006) Wilson, Chester L.; Cooper, William W.; Ruefli, Timothy W.A new categorical schema for strategic management is developed; a methodology for its implementation is elaborated; an application to mutual funds based on microeconomic theory is demonstrated; and results which establish quantitative measures for evaluating strategies, improve measures of managerial performance, and establish a new viii method of evaluating portfolio performance with guidance for potential mutual fund shareholders is presented. The evaluation of strategies themselves depends fundamentally on distinguishing them from their execution, from their realization in practice. The accounting definition of strategy, “a plan of action used to guide or control other plans of action” finds an observable, indeed measurable, example in the strategic choices of mutual funds, which are required by law to declare and conform to the general strategy by which they conduct investment management. The methodology to exploit the declared strategies and performance data of mutual funds is Data Envelopment Analysis (DEA), a nonparametric linear programming method of analysis for use with empirical data. By producing a piecewise linear frontier based on the Pareto-Koopmans efficient performers, DEA provides a basis for measuring performances and facilitates sensitivity analysis. Data Envelopment Analysis measures assume no prior, underlying functional form (such as regression equations or production functions) to relate input to output or to other variables. An evaluation of a selected group of mutual funds illustrates the general DEA method and evaluates the actual performance of the funds. Then a new application involving an extended, three-stage Data Envelopment Analysis separates the performance of the investment strategies from the effects of managerial shortcomings and abilities to implement the strategies. This makes it possible to separately identify and evaluate what a strategy can accomplish. It also makes it possible to evaluate separately short-run from ix long-run performance. Finally, DEA identifies benchmarking possibilities for removing these short-run deficiencies. This new method for evaluating strategies and shortcomings in performance is demonstrated by application to mutual funds, which display striking contrasts in managerial performance and strategic potential. Although demonstrated with mutual funds, this method is not restricted to such applications. Indeed, the methods in this thesis provide a new way of evaluating investment potentials by distinguishing between actual short-run performance and long-run potentials.Item An examination of investors' use of nonfinancial measures(2004) Jackson, Kevin Edward; Koonce, Lisa LynnIn this dissertation, I examine investors’ use of nonfinancial measures (e.g., customer satisfaction) on two dimensions. First, I consider the relevance of nonfinancial measures for investors and introduce a prescriptive four-step model for using such measures in conducting fundamental valuation. A model that articulates how investors can use nonfinancial measures is important because such measures can provide forwardlooking information that is not available from traditional accounting measures. However, nonfinancial measures only benefit investors if they can interpret and integrate the measures with other available information. Performing these tasks with nonfinancial measures is difficult for investors because they observe nonfinancial measures presented in a variety of ways, as no standards currently exist regarding such disclosures. The model provides a framework for investors to realize the benefits of using nonfinanical measures by articulating a process that facilitates interpreting and integrating these measures to make investment-related judgments in the current financial reporting environment. My dissertation also considers investors’ judgment problems associated with observing nonfinancial measures presented in various ways. Specifically, I conduct an experiment to investigate judgment problems that investors encounter when they observe nonfinancial measures presented using different scales (i.e., nominal, ordinal, interval, or ratio). My results provide evidence that investors rely more on a nonfinancial measure when its scale matches the scale the investor uses for his judgment, at the expense of an equally relevant measure whose scale does not match his judgment scale (termed a scale compatibility effect). Importantly, the effect exists in investors’ valuation-related judgments (e.g., assessments of price-earnings multiples). My results also show that the scale compatibility effect is reduced when investors evaluate several values for nonfinancial measures simultaneously. Implications of these results are discussed.