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Article: A New Method to Estimate Risk and Return of Non-traded Assets from Cash Flows: The Case of Private Equity Funds

TitleA New Method to Estimate Risk and Return of Non-traded Assets from Cash Flows: The Case of Private Equity Funds
Authors
Issue Date2012
Citation
Journal of Financial and Quantitative Analysis, 2012, v. 47, p. 511-535 How to Cite?
AbstractWe 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.
We develop a new methodology to estimate abnormal performance and risk exposure of nontraded 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. © Copyright 2012 Michael G. Foster School of Business, University of Washington.
Persistent Identifierhttp://hdl.handle.net/10722/227464
ISSN
2015 Impact Factor: 1.628
2015 SCImago Journal Rankings: 2.998
ISI Accession Number ID
References

 

DC FieldValueLanguage
dc.contributor.authorLin, TC-
dc.contributor.authorDriessen, J-
dc.contributor.authorPhalippou, L-
dc.date.accessioned2016-07-18T09:10:53Z-
dc.date.available2016-07-18T09:10:53Z-
dc.date.issued2012-
dc.identifier.citationJournal of Financial and Quantitative Analysis, 2012, v. 47, p. 511-535-
dc.identifier.issn0022-1090-
dc.identifier.urihttp://hdl.handle.net/10722/227464-
dc.description.abstractWe 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.-
dc.description.abstractWe develop a new methodology to estimate abnormal performance and risk exposure of nontraded 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. © Copyright 2012 Michael G. Foster School of Business, University of Washington.-
dc.languageeng-
dc.relation.ispartofJournal of Financial and Quantitative Analysis-
dc.titleA New Method to Estimate Risk and Return of Non-traded Assets from Cash Flows: The Case of Private Equity Funds-
dc.typeArticle-
dc.identifier.emailLin, TC: chunlin@hku.hk-
dc.identifier.authorityLin, TC=rp01077-
dc.identifier.doi10.1017/S0022109012000221-
dc.identifier.scopuseid_2-s2.0-84865428119-
dc.identifier.hkuros259303-
dc.relation.referenceshttp://www.scopus.com/mlt/select.url?eid=2-s2.0-84865428119&selection=ref&src=s&origin=recordpage-
dc.identifier.volume47-
dc.identifier.spage511-
dc.identifier.epage535-
dc.identifier.eissn1756-6916-
dc.identifier.isiWOS:000308256500002-

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