Relative Performance of Equity Markets: An Assessment in the Conventional and Downside Frameworks

This paper considers multiple measures of risk and return and appraises the performance of equity markets in the cross-section using a non-parametric procedure known as data envelopment analysis (DEA). In the appraisal, measures of risk (return) are treated as input (output) variables of the DEA model and developed and emerging markets are considered separately. The variation in relative performance among emerging markets is generally higher than that of developed markets. However, the overall performance of equity markets is consistent across the conventional and downside frameworks and the impact of risk measures on equity market performance is similar for both market types. Generally, the association between DEA ranking of markets and the ranking obtained with Treynor index are strong. The exception is when developed markets are ranked in the DEA models specified under the conventional framework.