Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/263773 
Year of Publication: 
2022
Series/Report no.: 
CESifo Working Paper No. 9843
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
Abstract: 
This paper analyses the stochastic behaviour of Private Equity returns (a measure of profitability) applying fractional integration methods to an extensive dataset including quarterly data spanning the last four decades for various geographical areas (US, Europe, Asia/Pacific, the Rest of the World and the Total) and investment types (Buyout & Growth Equity, Venture Capital, Fund of Funds & Secondary Funds, Infrastructure, Natural Resources, Real Estate, Subordinated Capital & Distressed as well as the aggregate category All Types). The results support the hypothesis of stationarity and mean reversion in all cases; however, there are differences in the degree of persistence across regions, the series for Europe being the closest to a short-memory process, while those for the US exhibit long memory, which implies that shocks have long-lived effects. Differences are also found in the results by asset class. The implications of these findings for private equity management, profit smoothing and return benchmarking are briefly discussed.
Subjects: 
private equity
profitability
fractional integration
long memory
mean reversion
JEL: 
C22
C59
Y10
Document Type: 
Working Paper
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