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Discount Rate Risk in Private Equity: Evidence from Secondary Market Transactions / Brian Boyer, Taylor D. Nadauld, Keith P. Vorkink, Michael S. Weisbach.
- Format:
- Book
- Author/Creator:
- Boyer, Brian.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w28691.
- NBER working paper series no. w28691
- Language:
- English
- Physical Description:
- 1 online resource: illustrations (black and white);
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 2021.
- Summary:
- Standard measures of private equity performance based on cash flows overlook discount rate risk. An index constructed from prices paid in secondary market transactions indicates that private equity discount rates vary considerably. While the standard alpha for our index is zero, measures of performance based on cash flow data for funds in our index are large and positive. To illustrate that results are not driven by idiosyncrasies of private equity secondary markets, we obtain similar results using cash flows and returns of synthetic funds that invest in small cap stocks. Ignoring variation in PE discount rates can lead to a misallocation of capital.
- Notes:
- Print version record
- April 2021.
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