scholarly journals The Returns to Entrepreneurial Investment: A Private Equity Premium Puzzle?

10.3386/w8876 ◽  
2002 ◽  
Author(s):  
Tobias Moskowitz ◽  
Annette Vissing-Jorgensen
Keyword(s):  
Private Equity ◽  
Equity Premium ◽  
Equity Premium Puzzle ◽  
Premium Puzzle

The Private Equity Premium Puzzle

2001 ◽  
Author(s):  
Tobias J. Moskowitz ◽  
Annette Vissing-Jorgensen
Keyword(s):  
Private Equity ◽  
Equity Premium ◽  
Equity Premium Puzzle ◽  
Premium Puzzle

scholarly journals Private Equity Premium Puzzle Revisited

2014 ◽  
Vol 104 (10) ◽  
pp. 3297-3334 ◽  
Author(s):  
Katya Kartashova
Keyword(s):  
Private Equity ◽  
Equity Premium ◽  
The United States ◽  
Equity Returns ◽  
Equity Premium Puzzle ◽  
Public And Private ◽  
Private And Public ◽  
The Difference ◽  
Premium Puzzle ◽  
Public Equity

This paper revisits the results of Moskowitz and Vissing-Jørgensen (2002) on returns to entrepreneurial investments in the United States. Following the authors' methodology and new data from the Survey of Consumer Finances, I find that the “private equity premium puzzle” does not survive the period of high public equity returns in the 1990s. The difference between private and public equity returns is positive and large period-by-period between 1999 and 2007. Whereas in the 2008–2010 period, overlapping with the Great Recession, public and private equities performances are substantially closer. I validate these results in the aggregate data going back to the 1960s. (JEL G11, G12, L26)

scholarly journals The Returns to Entrepreneurial Investment: A Private Equity Premium Puzzle?

2002 ◽  
Vol 92 (4) ◽  
pp. 745-778 ◽  
Author(s):  
Tobias J Moskowitz ◽  
Annette Vissing-Jørgensen
Keyword(s):  
Private Equity ◽  
Equity Premium ◽  
Equity Premium Puzzle ◽  
Trade Off ◽  
Probability Of Survival ◽  
Risk Return ◽  
Premium Puzzle ◽  
Public Equity ◽  
Privately Held

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 trade-off. 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.

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