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A Common Weight Approach to Construct Composite Indicators: The Evaluation of Fourteen Emerging Markets

Author

Listed:
  • Fu-Chiang Yang

    (De Lin Institute of Technology)

  • Rui-Hsin Kao

    (National Quemoy University)

  • Yi-Tui Chen

    (National Taipei University of Nursing and Health Sciences)

  • Yueh-Fei Ho

    (Aletheia University)

  • Cheng-Chung Cho

    (De Lin Institute of Technology)

  • Shi-Wei Huang

    (Taiwan Institute of Economic Research)

Abstract

This study presents an ongoing project, emerging market (EM) evaluation project, of the Taiwan Institute of Economic Research (TIER). The purpose of this project is to construct a composite indicator (CI) named as growth potential index (GPI) for selecting the promising EMs, in which to begin new or expand existing business is attractive to governments, firms, and investors. However, weight determination is one of the most difficult tasks in the construction process of a CI. A new approach inspired by the Z score and rooted in data envelopment analysis (DEA) is proposed to objectively determine the common weights for constructing the GPI without requiring data normalisation beforehand. The same dataset is used to compare the proposed common weight approach with the equal weighting method (currently used by the TIER), the widely used DEA-CI model, and the first common weight DEA-CI model. Spearman’s rank correlation test revealed a high positive correlation between the GPIs obtained by the proposed approach and each considered method. The major findings include: (1) China is the most promising EM; (2) Argentina, China, Malaysia, Poland, and Russia are above-average EMs; (3) India, Indonesia, Saudi Arabia, South Africa, and Thailand are below-average EMs; and (4) of the so-called BRIC countries (Brazil, Russia, India, and China), China is the best EM, and India is the worst EM.

Suggested Citation

  • Fu-Chiang Yang & Rui-Hsin Kao & Yi-Tui Chen & Yueh-Fei Ho & Cheng-Chung Cho & Shi-Wei Huang, 2018. "A Common Weight Approach to Construct Composite Indicators: The Evaluation of Fourteen Emerging Markets," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 137(2), pages 463-479, June.
    • Handle: RePEc:spr:soinre:v:137:y:2018:i:2:d:10.1007_s11205-017-1603-7
    DOI: 10.1007/s11205-017-1603-7
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    References listed on IDEAS

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    2. Afsharian, Mohsen & Ahn, Heinz & Harms, Sören Guntram, 2021. "A review of DEA approaches applying a common set of weights: The perspective of centralized management," European Journal of Operational Research, Elsevier, vol. 294(1), pages 3-15.
    3. Nazli Goker & E. Ertugrul Karsak & Mehtap Dursun, 2022. "An Integrated QFD and Common Weight DEA-Based Fuzzy MCDM Framework for Performance Ranking of Countries," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 159(1), pages 409-430, January.
    4. Hamdi A. Al-Jamimi & Galal M. BinMakhashen & Lutz Bornmann, 2022. "Use of bibliometrics for research evaluation in emerging markets economies: a review and discussion of bibliometric indicators," Scientometrics, Springer;Akadémiai Kiadó, vol. 127(10), pages 5879-5930, October.
    5. Khatab Alqararah, 2023. "Assessing the robustness of composite indicators: the case of the Global Innovation Index," Journal of Innovation and Entrepreneurship, Springer, vol. 12(1), pages 1-22, December.

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