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Diversification-consistent data envelopment analysis with general deviation measures

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  • Branda, Martin

Abstract

We propose new efficiency tests which are based on traditional DEA models and take into account portfolio diversification. The goal is to identify the investment opportunities that perform well without specifying our attitude to risk. We use general deviation measures as the inputs and return measures as the outputs. We discuss the choice of the set of investment opportunities including portfolios with limited number of assets. We compare the optimal values (efficiency scores) of all proposed tests leading to the relations between the sets of efficient opportunities. Strength of the tests is then discussed. We test the efficiency of 25 world financial indices using new DEA models with CVaR deviation measures.

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  • Branda, Martin, 2013. "Diversification-consistent data envelopment analysis with general deviation measures," European Journal of Operational Research, Elsevier, vol. 226(3), pages 626-635.
    • Handle: RePEc:eee:ejores:v:226:y:2013:i:3:p:626-635
    DOI: 10.1016/j.ejor.2012.11.007
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    Cited by:

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    2. Kerstens, Kristiaan & Mazza, Paolo & Ren, Tiantian & Van de Woestyne, Ignace, 2022. "Multi-Time and Multi-Moment Nonparametric Frontier-Based Fund Rating: Proposal and Buy-and-Hold Backtesting Strategy," Omega, Elsevier, vol. 113(C).
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    5. Martin Branda, 2016. "Mean-value at risk portfolio efficiency: approaches based on data envelopment analysis models with negative data and their empirical behaviour," 4OR, Springer, vol. 14(1), pages 77-99, March.
    6. Lee, Chia-Yen & Johnson, Andrew L., 2014. "Proactive data envelopment analysis: Effective production and capacity expansion in stochastic environments," European Journal of Operational Research, Elsevier, vol. 232(3), pages 537-548.
    7. Zhou, Zhongbao & Jin, Qianying & Xiao, Helu & Wu, Qian & Liu, Wenbin, 2018. "Estimation of cardinality constrained portfolio efficiency via segmented DEA," Omega, Elsevier, vol. 76(C), pages 28-37.
    8. Yang, Min & Li, Yongjun & Chen, Ya & Liang, Liang, 2014. "An equilibrium efficiency frontier data envelopment analysis approach for evaluating decision-making units with fixed-sum outputs," European Journal of Operational Research, Elsevier, vol. 239(2), pages 479-489.
    9. Xiao, Helu & Ren, Tiantian & Zhou, Zhongbao & Liu, Wenbin, 2021. "Parameter uncertainty in estimation of portfolio efficiency: Evidence from an interval diversification-consistent DEA approach," Omega, Elsevier, vol. 103(C).
    10. Lin, Ruiyue & Liu, Qian, 2021. "Multiplier dynamic data envelopment analysis based on directional distance function: An application to mutual funds," European Journal of Operational Research, Elsevier, vol. 293(3), pages 1043-1057.
    11. Ruiyue Lin & Zhiping Chen & Qianhui Hu & Zongxin Li, 2017. "Dynamic network DEA approach with diversification to multi-period performance evaluation of funds," OR Spectrum: Quantitative Approaches in Management, Springer;Gesellschaft für Operations Research e.V., vol. 39(3), pages 821-860, July.
    12. Choi, Hyung-Suk & Min, Daiki, 2017. "Efficiency of well-diversified portfolios: Evidence from data envelopment analysis," Omega, Elsevier, vol. 73(C), pages 104-113.
    13. Adam, Lukáš & Branda, Martin, 2021. "Risk-aversion in data envelopment analysis models with diversification," Omega, Elsevier, vol. 102(C).
    14. Liu, Wenbin & Zhou, Zhongbao & Liu, Debin & Xiao, Helu, 2015. "Estimation of portfolio efficiency via DEA," Omega, Elsevier, vol. 52(C), pages 107-118.
    15. Branda, Martin, 2015. "Diversification-consistent data envelopment analysis based on directional-distance measures," Omega, Elsevier, vol. 52(C), pages 65-76.
    16. Lin, Ruiyue & Li, Zongxin, 2020. "Directional distance based diversification super-efficiency DEA models for mutual funds," Omega, Elsevier, vol. 97(C).
    17. Zhou, Zhongbao & Xiao, Helu & Jin, Qianying & Liu, Wenbin, 2018. "DEA frontier improvement and portfolio rebalancing: An application of China mutual funds on considering sustainability information disclosure," European Journal of Operational Research, Elsevier, vol. 269(1), pages 111-131.
    18. Hirbod Assa, 2015. "Trade-off Between Robust Risk Measurement and Market Principles," Journal of Optimization Theory and Applications, Springer, vol. 166(1), pages 306-320, July.

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