A Multicriteria Approach to Mutual Fund Selection

In practice, when investors select a mutual fund, they take into account a number offactors. However, the most popular approach for evaluating mutual funds employs only a single criterion, thefinds’ mean, n’sk-adjusted, rate of return (Jensen’s a coefficient). In thepresent paper a multicriteria approach to mutual fund selection is presented. The multicriteria methodology allows numerousfactors to be considered, for example, the standard deviation of thefunds’ a’s, front and back-end loadfees, the level of diversification, quality of service, and so on. It also recognizes that individual investors possess heterogeneous attributes and preferences, and hence, allows investors to formulate different ratings (and consequently rankings) of the set of competing mutual funds.