This study considers the issues of noise-to-signal estimation, finite sample performance and hypothesis testing for a new nonparametric and stochastic efficiency estimation technique. We apply the technique for analyzing the efficiency of European banks from various regions and with various specializations. The technique seems well suited for this application area because banking inputs and outputs generally are measured with error, the banking production technology is not well-defined and large banking data sets such as BankScope allow for a nonparametric approach.

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Keywords European banks, hypothesis testing, noise-to-signal estimation, nonparametric efficiency estimation
Persistent URL dx.doi.org/10.1016/j.jbankfin.2006.08.004, hdl.handle.net/1765/14063
Citation
Post, G.T.. (2007). A Nonparametric Efficiency Estimation in Stochastic Environments II: noise-to-signal estimation, finite sample performance and hypothesis testing. Journal of Banking & Finance, 31(7), 2065–2080. doi:10.1016/j.jbankfin.2006.08.004