Resource title

Returns to Private Equity: Idiosyncratic Risk Does Matter!

Resource image

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Resource description

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.

Resource author

Elisabeth Müller

Resource publisher

Resource publish date

Resource language

eng

Resource content type

text/html

Resource resource URL

http://hdl.handle.net/10419/24691

Resource license

Adapt according to the presented license agreement and reference the original author.