Published by Pergamon Press for Operational Research Society
Journal of the Operational Research Society vol:63 pages:1199-1212
In addition to its use in Data Envelopment Analysis (DEA) models, the shortage function has been proposed as a tool to gauge performance in multi-moment portfolio models. An open issue is how the choice of direction vector affects the efficiency measurement, especially when some of the data can be negative and, from a practical point of view, whether and how the resulting league tables are affected. This paper illustrates empirically how the choice of direction vector affects the relative ranking of mean-variance portfolios. This result is relevant to all frontier-based applications, especially those where some of the data can be naturally negative.