Influence of short sales and margin requirements on portfolio efficiency - a DEA-risk approach

Abstract

We focus on efficiency of assets and portfolios available to investors on financial markets. We employ diversification consistent DEA-risk models with CVaR deviations as the inputs and expected rate of return as the output.

Moreover, we allow short selling and take into account margin requirements. Our model is then employed in an empirical study where selected assets from US stock market are investigated.

The sample approximation technique is used to deal with the multivariate skew-normal distribution of random returns.

Keywords

• Financial efficiency
• data envelopment analysis
• short sales
• margin requirements
• CVaR deviation