Utilising data envelopment analysis for selecting stock and benchmark firms in Tehran stock exchange

The purpose of this paper is to utilise data envelopment analysis (DEA) for selecting portfolio and benchmark firms’ performance of Tehran stock exchange (TSE). DEA has been recognised as a robust tool that is used for evaluating the performance of business organisations. The proposed approach is deployed based on empirical data collected from six major industries include machinery, metal ores mining, non‐metallic mineral products, pharmaceuticals, cement and chemicals and by‐products in TSE during the period 2005–2008 years. On a scale of 0–1.0, DEA analysis assesses the relative efficiency of every firm relative to the rest of the firms in terms of financial performance. The results show that Banker, Charnes and Cooper (BCC) and Charnes, Cooper and Rhodes (CCR) models are efficient for selecting stock and benchmark firms in Tehran stock exchange.