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A new perspective of equity market performance

Author

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  • Galagedera, Don U.A.
Abstract
The traditional data envelopment analysis (DEA) models assess equity market performance using the risk and return factor values associated only with the assessed equity market. However, in DEA models, the risk and return factors may be valued differently for different equity markets. A measure that incorporates the risk and return factor values of other equity markets to assess the performance of a given equity market is cross-efficiency. The cross-efficiency of an equity market provides a global perspective of its performance. In this paper, each year from 2003 to 2011, we estimate the cross-efficiency of 40 equity markets in a multi-dimensional risk-adjusted return framework. Applying the multiple-correlation clustering algorithm to the estimated cross-efficiency scores we classify the equity markets so that each cluster comprises of the markets that have been ranked similarly by the other equity markets. We highlight that cross-efficiency scores and membership in clusters is useful information to investors when constructing international portfolios.

Suggested Citation

  • Galagedera, Don U.A., 2013. "A new perspective of equity market performance," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 26(C), pages 333-357.
    • Handle: RePEc:eee:intfin:v:26:y:2013:i:c:p:333-357
    DOI: 10.1016/j.intfin.2013.07.003
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Dewan F. Wahid & Elkafi Hassini, 2022. "A Literature Review on Correlation Clustering: Cross-disciplinary Taxonomy with Bibliometric Analysis," SN Operations Research Forum, Springer, vol. 3(3), pages 1-42, September.
    2. Galagedera, Don U.A., 2014. "Modeling risk concerns and returns preferences in performance appraisal: An application to global equity markets," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 33(C), pages 400-416.
    3. Juan F. Monge & Mercedes Landete & Jos'e L. Ruiz, 2016. "Sharpe portfolio using a cross-efficiency evaluation," Papers 1610.00937, arXiv.org, revised Oct 2016.
    4. 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.
    5. Lin, Ruiyue & Peng, Yudan, 2024. "A new cross-efficiency meta-frontier analysis method with good ability to identify technology gaps," European Journal of Operational Research, Elsevier, vol. 314(2), pages 735-746.
    6. Vithessonthi, Chaiporn, 2014. "Financial markets development and bank risk: Experience from Thailand during 1990–2012," Journal of Multinational Financial Management, Elsevier, vol. 27(C), pages 67-88.

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    More about this item

    Keywords

    Relative performance; Self-appraised performance; Peer-appraised performance; Equity market classification; Data envelopment analysis;
    All these keywords.

    JEL classification:

    • C44 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Operations Research; Statistical Decision Theory
    • C67 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Input-Output Models
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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