Using regression and Data Envelopment Analysis (DEA) to forecast bank performance over time

Abstract

Forecasting is an important tool used to plan and evaluate business operations. Regression analysis is one of the most commonly used forecasting techniques for this purpose. Often forecasts are produced based on a set of comparable units such as individuals, groups, departments, or companies that perform similar activities. We apply a methodology that includes a new independent variable, the comparable unit's data envelopment analysis (DEA) relative efficiency, into the regression analysis. In this chapter, we apply this methodology to compare the performance of commercial banks over a 10-year time period.

Citation

Klimberg, R.K., Lawrence, K.D., Yermish, I., Lal, T. and Mrazik, D. (2009), "Using regression and Data Envelopment Analysis (DEA) to forecast bank performance over time", Lawrence, K.D. and Kleinman, G. (Ed.) Financial Modeling Applications and Data Envelopment Applications (Applications of Management Science, Vol. 13), Emerald Group Publishing Limited, Leeds, pp. 133-142. https://doi.org/10.1108/S0276-8976(2009)0000013010