A Two-Stage Discriminant Analysis and Entropy-Weighting Approach to Combining Financial and Market Performance: Evidence from Listed SMEs on India's Dedicated Exchanges
Keywords:
SME exchanges, discriminant analysis, entropy weighting, composite index, IndiaAbstract
This study constructs a Financial and Stock Market
Performance Index (FSMPI) for 142 Indian SMEs listed on
BSE SME and NSE Emerge across six fiscal years. Stepwise
Discriminant Analysis, applied separately to financial and
market variable pools using an external Profitable/Loss
Making classification, produces two sub-indices combined
through entropy weighting to avoid circularity. Financial
variables discriminate performance considerably more
strongly than market variables (R² = 0.460 versus 0.063), and
the two dimensions are related only weakly and non-linearly,
pointing to genuine pricing inefficiency in this market
segment and offering a transferable methodology for other
emerging SME exchanges.
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