A comprehensive fuzzy DEA model for emerging market assessment and selection decisions

Abstract

The changing economic conditions have challenged many financial institutions to search for more efficient and effective ways to assess emerging markets. Data envelopment analysis (DEA) is a widely used mathematical programming technique that compares the inputs and outputs of a set of homogenous decision making units (DMUs) by evaluating their relative efficiency. In the conventional DEA model, all the data are known precisely or given as crisp values. However, the observed values of the input and output data in real-world problems are sometimes imprecise or vague. In addition, performance measurement in the conventional DEA method is based on the assumption that inputs should be minimized and outputs should be maximized. However, there are circumstances in real-world problems where some input variables should be maximized and/or some output variables should be minimized. Moreover, real-world problems often involve high-dimensional data with missing values. In this paper we present a comprehensive fuzzy DEA framework for solving performance evaluation problems with coexisting desirable input and undesirable output data in the presence of simultaneous input–output projection. The proposed framework is designed to handle high-dimensional data and missing values. A dimension-reduction method is used to improve the discrimination power of the DEA model and a preference ratio (PR) method is used to rank the interval efficiency scores in the resulting fuzzy environment. A real-life pilot study is presented to demonstrate the applicability of the proposed model and exhibit the efficacy of the procedures and algorithms in assessing emerging markets for international banking.