A Statistical Method of Goodness on Quantitative Models of Efficiency and Effectiveness

The banking industry currently faces a lack of consistency among the quantitative models developed for measuring efficiency and effectiveness (EE). Consequently, selecting an appropriate model for a specific setting often boils down to a compelling argument. In this paper, we introduce a statistical method aimed at evaluating model of efficiency and effectiveness (MEE) in the banking sector, drawing upon the semi-strong Efficient Market Hypothesis (EMH) as a foundational premise. Within the case study Section of this paper, we apply our proposed statistical method to assess the alignment of a particular quantitative MEE with the EMH. Our results suggest a new approach to evaluating MEE, potentially leading to more robust model selection in the banking industry.