The Relationship between Risk-Return Trade-Off and Productive Efficiency: Evidence from Malaysia Banking Sector

Sufian, Fadzlan and Abdul Majid, Muhamed Zulkhibri (2008): The Relationship between Risk-Return Trade-Off and Productive Efficiency: Evidence from Malaysia Banking Sector.

Abstract

The non-parametric frontier approach, Data Envelopment Analysis (DEA) is employed to investigate the efficiency of banking stocks which are traded on the Kuala Lumpur Stock Exchange (KLSE). Unlike the earlier studies which use balance sheet and income statements data, the paper uses market data as the input and output variables. The results suggest that the most efficient bank is also highly ranked in terms of returns with relatively low standard deviation and beta. The results also suggest that all stocks which managed to appear on the efficiency frontier were mainly driven by the relatively higher mean returns rather than lower standard deviations and/or beta.

• Item Type: MPRA Paper
• Language: English
• Keywords: Bank Efficiency, Share Prices, Data Envelopment Analysis, Malaysia
• Subjects: D - Microeconomics > D2 - Production and Organizations > D24 - Production ; Cost ; Capital ; Capital, Total Factor, and Multifactor Productivity ; Capacity; G - Financial Economics > G2 - Financial Institutions and Services > G21 - Banks ; Depository Institutions ; Micro Finance Institutions ; Mortgages

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