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...

How do private equity (PE) investors affect firms' borrowing constraints, debt structure, and leverage dynamics? In this paper, we examine this central question by analyzing a large and novel database of PE-backed, bank-reliant, small and middle market firms in the U.S. using administrative...

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 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,...

Private equity (PE) has developed into a well-established asset class with strong growth in capital commitments over the last decades. Consequently, fund returns have decreased over time and investors have become more cost conscious. Based on a unique data set of 358 PE buyout funds with vintage...

We study the liquidity properties of private equity cash flows using data from 837 buyout and venture capital funds from 1984-2010. Most cash flow variation at a point in time is diversifiable – either idiosyncratic to a given fund or explained by the fund's age. Both capital calls and...

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,...

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 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...