A Comparison of the Linear Model and the Efficient Frontier for the Evaluation of Portfolio Performance
نویسندگان
1 Department of Mathematics, Science and Research Branch, Islamic Azad University, Tehran, Iran
2 Department of Accounting, Finance and Economics, Griffith University, Brisbane, QLD, Australia
3 Department of Mathematics and Computer Sciences, Kharazmi University, Tehran, Iran
doi
10.22054/jmmf.2024.76182.1115چکیده
Data envelopment analysis (DEA) is a methodology widely used for evaluating the relative performance of portfolios under a mean–variance framework. However, there has been little discussion of whether nonlinear models best suit this purpose. Moreover, when using DEA linear models, the portfolio efficiency obtained is not comparable to those on the efficient portfolio frontier. This is because a separable piecewise linear boundary usually below the efficient frontier is considered the efficient frontier, so the model does not fully explore the possibility of portfolio benchmarks. In this paper, and with use of the dual-Lagrangian function, we propose a linear model under a mean–variance framework to evaluate better the performance of portfolios relative to those on the efficient frontier.
