Fundamental analysis of stocks by two‐stage DEA | Zendy

Abad Cristina | Zendy; Thore Sten A. | Zendy; Laffarga Joaquina | Zendy

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Fundamental analysis of stocks by two‐stage DEA

Author(s) -

Abad Cristina,

Thore Sten A.,

Laffarga Joaquina

Publication year - 2004

Publication title -

managerial and decision economics

Language(s) - English

Resource type - Journals

SCImago Journal Rank - 0.288

H-Index - 51

eISSN - 1099-1468

pISSN - 0143-6570

DOI - 10.1002/mde.1145

Subject(s) - tying , earnings , data envelopment analysis , valuation (finance) , econometrics , economics , piecewise , value (mathematics) , stage (stratigraphy) , piecewise linear function , computer science , financial economics , mathematics , microeconomics , finance , mathematical optimization , statistics , geology , mathematical analysis , paleontology , geometry

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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