Fundamental analysis of stocks by two‐stage DEA
Authors:
- Cristina AbadCACristina Abad
- Sten A. ThoreSTSten A. Thore
- Joaquina LaffargaJLJoaquina Laffarga
- 16 June 2004
- journal article
- research article
- Published by Wiley in Managerial and Decision Economics
- Vol. 25 (5) , 231-241
Abstract
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.Keywords
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