Using data envelopment analysis (DEA) to forecast bank performance

Forecasting is an important tool used by businesses to plan and evaluate their operations. One of the most commonly used techniques for forecasting is regression analysis. Often forecasts are produced for a set of comparable units which could be individuals, groups, departments, or companies that perform similar activities such as a set of banks, a group of mangers, and so on. We apply a methodology that includes a new variable, the comparable unit's data envelopment analysis relative efficiency, into the regression analysis. This chapter presents the results of applying this methodology to the performance of commercial banks.