This paper proposes a theory of the equilibrium liquidity premia of private equity funds and explores its asset-pricing implications. The theory is based on the notion that investors are exposed to the risk of facing surprise liquidity shocks, which upon arrival force them to liquidate their...

Whether fat tails exist in the distribution of venture capital and private equity returns affects how investors view the attractiveness of such investments, especially if means or variances are potentially infinite. Using fund performance data, I propose and test a smooth double Pareto...

Limited partners (LPs) of private equity funds commit to invest with extreme levels of illiquidity and significant uncertainty regarding the timing of capital flows. Secondary markets have emerged which alleviate some of the associated cost. This paper develops a subjective valuation model...

We study the asset allocation problem of an institutional investor (LP) that invests in stocks, bonds, and private equity (PE). PE investments are risky, illiquid, and long-term. The LP repeatedly commits capital to PE funds, and this capital is gradually called and eventually distributed back...

We develop a dynamic valuation model of private equity (PE) investments by solving the portfolio-choice problem for a risk-averse investor (LP), who invests in a PE fund, managed by a general partner (GP). Key features are illiquidity, leverage, GP value-adding skills (alpha), and compensation,...

We develop a dynamic valuation model of private equity (PE) investments by solving the portfolio-choice problem for a risk-averse investor (LP), who invests in a PE fund, managed by a general partner (GP). Key features are illiquidity, leverage, GP value-adding skills (alpha), and compensation,...

We develop a dynamic valuation model of private equity (PE) investments by solving the portfolio-choice problem for a risk-averse investor (LP), who invests in a PE fund, managed by a general partner (GP). Key features are illiquidity, leverage, GP value-adding skills (alpha), and compensation,...

Theoretical models imply fund size and performance should be negatively linked. However, empiricists have failed to uncover consistent support for this negative relation. Using a new econometric framework which includes fund-specific sensitivities to decreasing returns to scale, we find a both...

The paper develops a novel econometric approach to estimate abnormal returns and systematic risk of private equity investments from observable investment cash flows. A unique feature of the method is that it gives closed-form estimators for systematic risk and abnormal returns. In addition,...

We examine the performance of 2,790 private equity (PE) funds incepted during 1979-2008 using Stochastic Discount Factors (SDFs) implied by the two leading consumption-based asset pricing models (CBAPMs) — external habit and long-run risks — as their assumptions appear consistent with...