Driessen, Joost, Lin, Tse-Chun and Phalippou, Ludovic (2012) A new method to estimate risk and return of non-traded assets from cash flows: The case of private equity funds. Journal of Financial and Quantitative Analysis, 47 (3). pp. 511-535.
We develop a new methodology to estimate abnormal performance and risk exposure of non-traded assets from cash flows. Our methodology extends the standard internal rate of return approach to a dynamic setting. The small-sample properties are validated using a simulation study. We apply the method to a sample of 958 private equity funds. For venture capital funds, we find a high market beta and underperformance before and after fees. For buyout funds, we find a relatively low market beta and no evidence for outperformance. We find that self-reported net asset values significantly overstate fund values for mature and inactive funds.
|Keywords:||Risk exposure, Abnormal return, Private equity|
|Centre:||Faculty of Finance|
|Date Deposited:||01 Aug 2012 13:19|
|Last Modified:||23 Oct 2015 14:07|
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