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

J.J.A.G. Driessen, T.C. Lin, L. Phalippou

Research output: Contribution to journalArticleScientificpeer-review

62 Citations (Scopus)

Abstract

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.
Original languageEnglish
Pages (from-to)511-535
JournalJournal of Financial and Quantitative Analysis
Volume47
Issue number3
DOIs
Publication statusPublished - 2012

Fingerprint Dive into the research topics of 'A new method to estimate risk and return of non-traded assets from cash flows: The case of private equity funds'. Together they form a unique fingerprint.

  • Cite this