Proceedings of 6th Annual American Business Research Conference
9 - 10 June 2014, Sheraton LaGuardia East Hotel, New York, USA, ISBN: 978-1-922069-52-8
Efficiency Assessment of the PSI-20 Enterprises Using Stochastic
Frontier Analysis
Nuno Ferreiraa and Rui Menezesa
The aim of the study is to assess the technical efficiency (TE) of the individual companies and
their respective groups of the Portuguese stock market by using “interest income”, “depreciation”,
and “cost of goods”, “employees and net sales” as exogenous input variables in a Stochastic
Frontier Analysis (SFA) model. The TE of the PSI-20 enterprises index is estimated exploring
what factors contribute to efficiency variability, applying the SFA approach main advantage which
lies in its potential to discriminate between measurement error and systematic inefficiencies in the
estimation process. The results reveal that TE is higher for the enterprises in industry,
construction and distribution economic sectors whereas the commercial banking sector has the
lowest TE scores. The “employees” and “depreciation” variables are the factors that most
contribute to the stock market inefficiency.
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Nuno Ferreiraa and Rui Menezesa, Department of Quantitative Methods, IBS-ISCTE Business School, ISCTE, Av.
Forças Armadas, 1649-025 Lisboa, Portugal