Estimation of firms efficiencies using a kalman filter and stochastic efficiency model

Abstract

The efficiencies of firms should be evaluated, based on their historical financial data. Here a process for evaluation is proposed. Each historical data set is reduced to a distribution function with a mean and a variance estimated by Kalman filter. Then, a stochastic efficiency model is applied to this reduced data. Then a new efficiency measure is proposed and compared with existing measures. An application is made to three kinds of firms.