This paper suggests a solution to what has become known as the "private equity premium puzzle" (Moskowitz and Vissing-Jorgensen (2002)). We interpret occupational choice as a dynamic portfolio choice problem of a life-cycle investor facing a liquidity constraint and imperfect information about...

Investment in private equity is extremelyconcentrated.Even though private equity returns are generally no higherthan the market return on all publicly traded equity, entrepreneurialhouseholds invest more than 70 percent of their private holdings in a singleprivate company in which they have an...

We document the return to investing in U.S. nonpublicly traded equity. Entrepreneurial investment is extremely concentrated, yet despite its poor diversification, we find that the returns to private equity are no higher than the returns to public equity. Given the large public equity premium, it...