A new method to estimate risk and return of non-traded assets from cash flows: The case of private equity funds

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.

Abstract

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.

Item Type: Article
Keywords: Risk exposure, Abnormal return, Private equity, finance
Subject(s): Finance
Date Deposited: 01 Aug 2012 13:19
Last Modified: 24 Feb 2017 15:24
Funders: N/A
URI: http://eureka.sbs.ox.ac.uk/id/eprint/3803

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