DEA models with a constant input for SRI mutual funds with an application to European and Swedish funds

Data envelopment analysis (DEA) allows one to take into account the degree of social responsibility of mutual funds, together with financial risk and return. This contribution proposes some DEA models in which the input and output variables are focused on the main determinants of investments in socially responsible investing (SRI) mutual funds. Unlike other DEA models, a constant initial capital and the final value of the investment are considered; this ensures the positivity of all variables, even during financial crises. The initial capital deposited by an investor is assumed to be equal for all funds, so that we have a constant input. The implications of the presence of a constant input in DEA models are studied, which have important consequences for the analysis of the performance of mutual funds, in particular with regard to the type of returns to scale. The models proposed are applied to the European data to evaluate the performance of SRI mutual funds in the period June 2006 to June 2009. Moreover, a specific analysis compares the performance of SRI and non‐SRI mutual funds, in order to determine if SRIs require a sacrifice in terms of financial rewards. Finally, a more detailed investigation is carried out for the Swedish SRI mutual funds.