Beyond Efficiency: Testing DEA -Selected Portfolios with Behavioral Utility and the Sharpe Ratio in BIST 100

Abstract

The study aims to empirically test the superiority of portfolios composed of stocks located on the DEA efficient frontier and introduces a multidimensional evaluation framework that integrates technical efficiency analysis with investor behavior. The risk-return space, based on Markowitz’s mean-variance model, is non-parametrically restructured using Data Envelopment Analysis (DEA). Portfolios constructed based on DEA super-efficiency scores are evaluated using a utility function representing investor preferences modeled within a behavioral finance framework (A = 1 and A = 5); performance is also compared via the Sharpe ratio. The analysis, conducted using BIST 100 data for the period 2016-2019, shows that the highest utility and Sharpe ratios are concentrated in portfolios identified by DEA as efficient. These findings suggest that technical efficiency and behavioral investment decisions can align, providing investors with a holistic framework for both rational and behaviorally consistent portfolio selection.