Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/27362
Authors: 
Fossen, Frank M.
Year of Publication: 
2008
Series/Report no.: 
DIW Discussion Papers 839
Abstract: 
The empirical finding that entrepreneurs tend to invest a large share of their wealth in their own firms despite comparably low returns and high risk has become known as the private equity premium puzzle. This paper provides evidence supporting the hypothesis that lower risk aversion of entrepreneurs, and not necessarily credit constraints, may explain this puzzle. The analysis is based on a large, representative panel data set for Germany, which provides information on asset portfolios and experimentally validated risk attitudes. The results show that both the ownership probability and the conditional portfolio share of private business equity significantly increase with higher risk tolerance.
Subjects: 
Entrepreneurship
private equity
investment
risk aversion
JEL: 
G11
G32
L26
J23
D81
Document Type: 
Working Paper

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