The Returns to Entrepreneurial Investment: A Private Equity Premium Puzzle?
(565 K)
|
NBER Working Paper No. 8876
Issued in April 2002
NBER Program(s): AP CF
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 is puzzling why households willingly invest substantial amounts in a single privately held firm with a seemingly far worse risk-return tradeoff. We briefly discuss how large nonpecuniary benefits, a preference for skewness, or overestimates of the probability of survival could potentially explain investment in private equity despite these findings.
Published: Moskowitz, Tobias J. and Annette Vissing-Jørgensen. “The Returns to Entrepreneurial Investment: A Private Equity Premium Puzzle?" American Economic Review 92, 4 (2002): 745-778.
This paper is available as PDF (565 K) or via email.
Machine-readable bibliographic record -
MARC,
RIS,
BibTeX
|
|
|
About
Support
The research activities of the NBER are funded by grants from federal research agencies, by private foundations, and by generous donations from our corporate associates and from private individuals. The NBER is a non-profit, 501(c)(3) organization. For information on supporting the NBER, please contact:
Mr. Denis Healy, Director of Development
NBER
1050 Massachusetts Avenue
Cambridge, MA 02138-5398
ph: 617-868-3900
email: dhealy@nber.org
Close
