Risk and Expected Returns of Private Equity Investments: Evidence Based on Market Prices

Narasimhan Jegadeesh, Roman Kräussl, Joshua M. Pollet

Research output: Contribution to journalReview articlepeer-review

Abstract

We estimate the risk and expected return of private equity using market prices of publicly traded funds of funds holding unlisted private equity funds and of publicly traded private equity funds participating directly in private equity transactions. We find that the market expects unlisted private equity funds to earn abnormal returns between -0.5% and 2% per year. In addition, private equity has a market beta close to one and a positive beta on the SMB factor. These listed funds exhibit greater systematic risk than an index based on the self-reported net asset value of unlisted private equity funds.

Original languageEnglish (US)
Pages (from-to)3269-3302
Number of pages34
JournalReview of Financial Studies
Volume28
Issue number12
DOIs
StatePublished - Dec 1 2015

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics

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