{'fraction_non_alphanumeric': 0.025341130604288498, 'fraction_numerical': 0.0, 'mean_word_length': 5.54140127388535, 'pattern_counts': {'":': 0, '<': 0, '<?xml version=': 0, '>': 0, 'https://': 0, 'lorem ipsum': 0, 'www.': 0, 'xml': 0}, 'pii_count': 0, 'substrings_counts': 0, 'word_list_counts': {'cursed_substrings.json': 0, 'profanity_word_list.json': 0, 'sexual_word_list.json': 0, 'zh_pornsignals.json': 0}}
THE ASSOCIATION BETWEEN TECHNICAL EFFICIENCY INNOVATIONS AND STOCK RETURNS: AN APPLICATION OF DATA ENVELOPMENT ANALYSIS

ABSTRACT This paper examines the association between two measures of a firm's performance in Taiwan Electronic Industry: its relative technical efficiency scores and its stock market returns. The first measure evaluates a firm's competence at combining inputs and outputs in its production process while the second measure reflects firm's fundamental value. We measure technical efficiency scores by using Data envelopment analysis (DEA). Then a hedge portfolios strategy, of buying firms with the most positive efficiency news and short-selling those with the worst news, is formed in turn. Empirical results indicate that the strategy yields positive buy-and-hold abnormal returns. More importantly, the addition of variables designed to capture beta risk, unexpected earnings, earnings-to-price, book-to-market and size has no impact on the robustness of technical efficiency to predict future returns.