An Integrated Approach to Stock Selection and Ranking: Combining Shannon Entropy Technique, DEA, and Inverse DEA
This study proposes a novel, integrated framework that combines Shannon Entropy Technique (SET), Data Envelopment Analysis (DEA), and Inverse DEA (IDEA) for the objective evaluation and ranking of equities, with a case application to the tourism sector of the Taiwan Stock Exchange (TWSE). SET is emp...
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| Format: | Article |
| Language: | English |
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IEEE
2025-01-01
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| Series: | IEEE Access |
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| Online Access: | https://ieeexplore.ieee.org/document/11072167/ |
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| author | Temitope Olubanjo Kehinde Sai-Ho Chung Oludolapo A. Olanrewaju |
| author_facet | Temitope Olubanjo Kehinde Sai-Ho Chung Oludolapo A. Olanrewaju |
| author_sort | Temitope Olubanjo Kehinde |
| collection | DOAJ |
| description | This study proposes a novel, integrated framework that combines Shannon Entropy Technique (SET), Data Envelopment Analysis (DEA), and Inverse DEA (IDEA) for the objective evaluation and ranking of equities, with a case application to the tourism sector of the Taiwan Stock Exchange (TWSE). SET is employed for data-driven variable selection to reduce dimensionality across five financial perspectives, enhancing the discriminatory power of DEA. DEA identifies efficient stocks, while IDEA ranks them based on adaptability to output perturbations, providing a dynamic and interpretable view of efficiency. Empirical analysis reveals that only five out of sixteen stocks achieved full efficiency. The IDEA-based ranking uncovered distinct adaptability profiles, with some firms requiring minimal input changes to accommodate output growth, indicating operational flexibility. Sensitivity analysis and model comparisons with super-efficiency and cross-efficiency DEA confirm the robustness and consistency of the proposed method, even under adverse scenarios. This work advances financial decision-making by offering a reproducible, bias-minimized, and scenario-sensitive ranking model. Its transparent structure makes it especially valuable for investors, policymakers, and portfolio managers navigating volatile or crisis-prone markets. |
| format | Article |
| id | doaj-art-b5b97e8b923d4b5dac9ddb1c92d3faf8 |
| institution | Kabale University |
| issn | 2169-3536 |
| language | English |
| publishDate | 2025-01-01 |
| publisher | IEEE |
| record_format | Article |
| series | IEEE Access |
| spelling | doaj-art-b5b97e8b923d4b5dac9ddb1c92d3faf82025-08-20T03:36:07ZengIEEEIEEE Access2169-35362025-01-011313885113886610.1109/ACCESS.2025.358641711072167An Integrated Approach to Stock Selection and Ranking: Combining Shannon Entropy Technique, DEA, and Inverse DEATemitope Olubanjo Kehinde0https://orcid.org/0000-0001-7703-7395Sai-Ho Chung1https://orcid.org/0000-0002-0534-7930Oludolapo A. Olanrewaju2https://orcid.org/0000-0002-3099-9295Department of Industrial and Systems Engineering, The Hong Kong Polytechnic University, Hung Hom, Hong KongDepartment of Industrial and Systems Engineering, The Hong Kong Polytechnic University, Hung Hom, Hong KongDepartment of Industrial Engineering, Durban University of Technology, Durban, South AfricaThis study proposes a novel, integrated framework that combines Shannon Entropy Technique (SET), Data Envelopment Analysis (DEA), and Inverse DEA (IDEA) for the objective evaluation and ranking of equities, with a case application to the tourism sector of the Taiwan Stock Exchange (TWSE). SET is employed for data-driven variable selection to reduce dimensionality across five financial perspectives, enhancing the discriminatory power of DEA. DEA identifies efficient stocks, while IDEA ranks them based on adaptability to output perturbations, providing a dynamic and interpretable view of efficiency. Empirical analysis reveals that only five out of sixteen stocks achieved full efficiency. The IDEA-based ranking uncovered distinct adaptability profiles, with some firms requiring minimal input changes to accommodate output growth, indicating operational flexibility. Sensitivity analysis and model comparisons with super-efficiency and cross-efficiency DEA confirm the robustness and consistency of the proposed method, even under adverse scenarios. This work advances financial decision-making by offering a reproducible, bias-minimized, and scenario-sensitive ranking model. Its transparent structure makes it especially valuable for investors, policymakers, and portfolio managers navigating volatile or crisis-prone markets.https://ieeexplore.ieee.org/document/11072167/Data envelopment analysisinverse DEAefficiencystocksstock marketranking |
| spellingShingle | Temitope Olubanjo Kehinde Sai-Ho Chung Oludolapo A. Olanrewaju An Integrated Approach to Stock Selection and Ranking: Combining Shannon Entropy Technique, DEA, and Inverse DEA IEEE Access Data envelopment analysis inverse DEA efficiency stocks stock market ranking |
| title | An Integrated Approach to Stock Selection and Ranking: Combining Shannon Entropy Technique, DEA, and Inverse DEA |
| title_full | An Integrated Approach to Stock Selection and Ranking: Combining Shannon Entropy Technique, DEA, and Inverse DEA |
| title_fullStr | An Integrated Approach to Stock Selection and Ranking: Combining Shannon Entropy Technique, DEA, and Inverse DEA |
| title_full_unstemmed | An Integrated Approach to Stock Selection and Ranking: Combining Shannon Entropy Technique, DEA, and Inverse DEA |
| title_short | An Integrated Approach to Stock Selection and Ranking: Combining Shannon Entropy Technique, DEA, and Inverse DEA |
| title_sort | integrated approach to stock selection and ranking combining shannon entropy technique dea and inverse dea |
| topic | Data envelopment analysis inverse DEA efficiency stocks stock market ranking |
| url | https://ieeexplore.ieee.org/document/11072167/ |
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