Fundamental analysis of stocks by two-stage DEA
Sten A. Thore and
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Sten A. Thore: The University of Texas at Austin, USA, Postal: The University of Texas at Austin, USA
Joaquina Laffarga: Universidad de Sevilla, Sevilla, Spain, Postal: Universidad de Sevilla, Sevilla, Spain
Managerial and Decision Economics, 2004, vol. 25, issue 5, 231-241
Fundamental analysis of stocks links financial data to firm value in two consecutive steps: a predictive information link tying current financial data to future earnings, and a valuation link tying future earnings to firm value. At each step, a large number of causal factors have to be factored into the evaluation. To effect these calculations, we propose a new two-stage multi-criteria procedure, drawing on the techniques of data envelopment analysis. At each stage, a piecewise linear efficiency frontier is fitted to the observed data. The procedure is illustrated by a numerical example, analyzing some 30 stocks in the Spanish manufacturing industry in the years 1991-1996. Copyright © 2004 John Wiley & Sons, Ltd.
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Persistent link: https://EconPapers.repec.org/RePEc:wly:mgtdec:v:25:y:2004:i:5:p:231-241
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