Financial Markets and Portfolio Management

, Volume 24, Issue 3, pp 245–269

Association between environmental factors and equity market performance: evidence from a nonparametric frontier method


DOI: 10.1007/s11408-010-0133-y

Cite this article as:
Galagedera, D.U.A. Financ Mark Portf Manag (2010) 24: 245. doi:10.1007/s11408-010-0133-y


In this cross-sectional study, equity market performance is assessed in a multidimensional risk-adjusted return framework using a nonparametric procedure known as data envelopment analysis. Employing a censored regression procedure, the association between equity market performance and a set of variables that proxy market characteristics and the political and business environment in which the market operates is investigated. The paper contributes to the literature on the association between environmental factors and equity market performance by using a methodology not previously employed in such investigations. The results reveal that equity market performance may be positively related to the size of the market and friendliness of the business environment. Friendliness of the business environment is an objective measure of regulations conducive to business and their enforcement.


Relative performance Data envelopment analysis Emerging markets Developed markets Operational environment 

JEL Classification

C44 C67 G10 G15 

Copyright information

© Swiss Society for Financial Market Research 2010

Authors and Affiliations

  1. 1.Department of Econometrics and Business StatisticsMonash UniversityCaulfield EastAustralia

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