Private Equity Performance and Liquidity Risk

Phalippou, Ludovic, Franzoni, Francesco and Nowak, Eric (2012) Private Equity Performance and Liquidity Risk. The Journal of Finance, 67 (6). pp. 2341-2373.

Abstract

Private equity has traditionally been thought to provide diversification benefits. However, these benefits may be lower than anticipated as we find that private equity suffers from significant exposure to the same liquidity risk factor as public equity and other alternative asset classes. The unconditional liquidity risk premium is about 3% annually and, in a four factor model, the inclusion of this liquidity risk premium reduces alpha to zero. In addition, we provide evidence that the link between private equity returns and overall market liquidity occurs via a funding liquidity channel.

Item Type: Article
Keywords: private capital; liquidity risk; cost of capital; finance
Subject(s): Finance
Date Deposited: 19 Oct 2011 15:24
Last Modified: 29 Jan 2018 09:52
Funders: N/A
URI: http://eureka.sbs.ox.ac.uk/id/eprint/929

Actions (login required)

Edit View Edit View