Ranking Iranian Mutual Funds using Stochastic Dominance Criteria

Mutual funds are among the most important financial institutions in the capital market and allocate capital to investable options by collecting capital at the micro level. Over the last few years, these funds have been embraced in the Iranian context. The purpose of this study is to rank Iranian investment funds based on their performance using stochastic dominance criteria. To fulfill this, the performance of mutual funds in Iran has been evaluated for the period from March 2010 to September 2013. The results suggest the domination of first-, second-, and third-order stochastic dominance among the mutual funds under study. The presence of first-order stochastic dominance leads to arbitrage opportunities which indicate market inefficiency. The results also indicate that Tejarat Bank mutual fund has the best performance whereas Saba mutual fund has the weakest performance.