Portfolio selection based on Data Envelopment Analysis
Keywords:
Data Envelopment Analysis, Portfolio selection, Cross-efficiency, Super-efficiency, Markowitz Mean-variance, Mean–Variance Cross-efficiencyAbstract
This article presents methodologies based on Data Envelopment Analysis (DEA) for portfolio selection in two stages. In the first stage, the stock are evaluated using DEA, Super-efficiency and DEA Cross-efficiency. These methods are utilized based on CRS-Output oriented model. Financial ratios are used as the inputs and outputs for evaluating. In the second stage, three portfolio stock–weighting strategies are applied, efficiency score, Markowitz Mean–Variance model and Mean–Variance cross-efficiency. The results show that Mean–Variance cross-efficiency strategy created the superior portfolio in cumulative return than efficiency score and Markowitz Mean–Variance strategy.
References
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[2] Charnes, A., Cooper, W. W., & Rhodes, E. (1978). Measuring the efficiency of decision making units. European Journal of Operational Research, 2(6), 429–444.
[3] Andersen, P., & Petersen, N. C. (1993). A procedure for ranking efficient units in data envelopment analysis. Management Science, 39(10), 1261–1264.
[4] Doyle, J., & Green, R. (1994). Efficiency and cross-efficiency in DEA: Derivations, meanings and uses. Journal of the Operational Research Society, 45(5), 567–578.
[5] Lim, S., Oh, K.W., and Zhu J. (2014). Use of DEA cross-efficiency evaluation in portfolio selection: An application to Korean stock market. European Journal of Operational Research 236, 361–368
[6] Markowitz H. (1952), "Portfolio Selection," The Journal of Finance, vol.7, pp. 77-91.
[7] Gardijan M. and Škrinjarić T. (2015). Equity portfolio optimization: A DEA based methodology applied to the Zagreb Stock Exchange, Croatian Operational Research Review CRORR 6, 405–417.
[8] Nanda S.R., Mahanty B., Tiwari M.K. (2010). Clustering Indian stock market data for portfolio management, Expert Systems with Applications 37, 8793–8798
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Published
2019-03-18
How to Cite
[1]
A. Saechin and S. Tragantalerngsak, “Portfolio selection based on Data Envelopment Analysis”, TJOR, vol. 7, no. 1, pp. 15–24, Mar. 2019.
Issue
Section
Research Paper
