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Title:Returns to private equity: idiosyncratic risk does matter! PDF Logo
Authors:Müller, Elisabeth
Issue Date:2009
Series/Report no.:ZEW Discussion Papers 04-29 [rev.3]
Abstract:Owners of private companies often invest a substantial share of their net worth in one company, which exposes them to idiosyncratic risk. For US companies we investigate whether owners require compensation for lack of diversification in the form of higher returns to equity. Exposure to idiosyncratic risk is measured as the share of the owner’s net worth invested in the company. Equity returns are measured as the earnings rate and as capital gains. For both returns measures we find a positive and significant influence of exposure to idiosyncratic risk. This paper improves our understanding of returns to private equity.
Subjects:returns to private equity
exposure to idiosyncratic risk
private companies
JEL:G32
G11
L26
older Version:http://hdl.handle.net/10419/24054
Document Type:Working Paper
Appears in Collections:Publikationen von Forscherinnen und Forschern des ZEW
ZEW Discussion Papers

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