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Publication details

DEA-Risk Efficiency and Stochastic Dominance Efficiency of Stock Indices

Journal Article

Branda M., Kopa Miloš

serial: Finance a úvěr-Czech Journal of Economics and Finance vol.62, 2 (2012), p. 106-124

research: CEZ:AV0Z10750506

project(s): GAP402/10/1610, GA ČR, GAP402/12/0558, GA ČR

keywords: Data Envelopment Analysis, Risk measures, Index efficiency, Stochastic dominance

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abstract (eng):

In this article, the authors deal with the efficiency of world stock indices. Basically, they compare three approaches: mean-risk, data envelopment analysis (DEA), and stochastic dominance (SD) efficiency. In the DEA methodology, efficiency is defined as a weighted sum of outputs compared to a weighted sum of inputs when optimal weights are used. In DEA-risk efficiency, several risk measures and functionals which quantify the risk of the indices (var, VaR, CVaR, etc.) as DEA inputs are used. Mean gross return is considered as the only DEA output. When only one risk measure as the input and mean gross return as the output are considered, the DEA-risk efficiency is related to the mean-risk efficiency. The authors test the DEA-risk efficiency of 25 indices and they analyze the sensitivity of their results with respect to the selected inputs. Using stochastic dominance criteria, they test pairwise efficiency as well as portfolio efficiency, allowing full diversification across assets.


bocek: 2012-12-21 16:10