Enhancement of equity portfolio performance using data envelopment analysis |
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Authors: | Eero Pä tä ri,Timo Leivo,Samuli Honkapuro |
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Affiliation: | 1. School of Business, Lappeenranta University of Technology, Finland;2. LUT Energy, Lappeenranta University of Technology, Finland |
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Abstract: | This paper examines the applicability of data envelopment analysis (DEA) as a basis of selection criteria for equity portfolios. It is the first DEA application for constructing a combined equity investment strategy that aims to integrate the benefits of both value investing and momentum investing. The 3-quantile portfolios are composed of a comprehensive sample of Finnish non-financial stocks based on their DEA efficiency scores that are calculated using three variants of DEA models (the constant returns-to-scale, the super-efficiency, and the cross-efficiency models). The performance of portfolios is evaluated on the basis of the average return and several risk-adjusted performance metrics throughout the 1994–2010 sample period. |
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Keywords: | Data envelopment analysis (DEA) Investment analysis Portfolio performance Value investing Momentum investing Performance measurement |
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