PSI-20 portfolio efficiency analysis with SFA

Abstract

The determination of the study was to assessthe technical efficiency of the individual companies andtheir respective groups of the Portuguese stock market.In order to achieve that were combined the inputvariables “market value and return” with exogenousvariables such as “interest income," “depreciation,"“cost of goods," “employees” and “net sales” in aStochastic Frontier Analysis model. The technicalefficiency of the PSI-20 enterprises index was estimateddiscovering the factors which assurance to efficiencyvariability, applying the SFA approach mainimprovement which lies in its potential to categorizebetween measurement error and systematicinefficiencies in the estimation process. The resultsrevealed that the technical efficiency is higher for theenterprises in industry, construction and distributioneconomic sectors whereas the commercial bankingsector has the lowest technical efficiency scores. The“employees” and “depreciation” variables are theelements that most enhance to the stock marketinefficiency.