The authors introduce a new index of the business cycle that uses the Mahalanobis distance to measure the statistical similarity of current economic conditions to past episodes of recession and robust growth. Their index has several important features that distinguish it from the Conference...

Investors have traditionally relied on mean-variance analysis to determine a portfolio’s optimal asset mix, but they have struggled to incorporate private equity into this framework because they do not know how to estimate its risk. The observed volatility of private equity returns is...

Financial analysts typically estimate volatilities and correlations from monthly or higher frequency returns when determining the optimal composition of a portfolio. Although it is widely acknowledged that these measures are not necessarily stationary across samples, most analysts assume...

The Sharpe ratio is the most widely used metric for comparing performance across investment managers and strategies, and the information ratio is as commonly used to evaluate performance relative to a benchmark. Although it is widely recognized that non-linearities arising from the inclusion of...

We use a proprietary database of private equity returns to measure the excess return of private equity over public equity and to partition it into two components: an asset class alpha and compensation for illiquidity. Our evidence suggests that private equity managers, as a group, generate alpha...