Abstract

http://ssrn.com/abstract=306410
 
 

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The Returns to Entrepreneurial Investment: A Private Equity Premium Puzzle?


Annette Vissing-Jorgensen


National Bureau of Economic Research (NBER); University of California Berkeley, Haas School of Business

Tobias J. Moskowitz


AQR Capital; University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER)

April 2002

NBER Working Paper No. w8876

Abstract:     
We document the return to investing in U.S. nonpublicly traded equity. Entrepreneurial investment is extremely concentrated, yet despite its poor diversification, we find that the returns to private equity are no higher than the returns to public equity. Given the large public equity premium, it is puzzling why households willingly invest substantial amounts in a single privately held firm with a seemingly far worse risk-return tradeoff. We briefly discuss how large nonpecuniary benefits, a preference for skewness, or overestimates of the probability of survival could potentially explain investment in private equity despite these findings.

Number of Pages in PDF File: 54


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Date posted: April 4, 2002  

Suggested Citation

Vissing-Jorgensen, Annette and Moskowitz, Tobias J., The Returns to Entrepreneurial Investment: A Private Equity Premium Puzzle? (April 2002). NBER Working Paper No. w8876. Available at SSRN: http://ssrn.com/abstract=306410

Contact Information

Annette Vissing-Jorgensen
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
University of California Berkeley, Haas School of Business ( email )
545 Student Services Building, #1900
2220 Piedmont Avenue
Berkeley, CA 94720
United States
Tobias J. Moskowitz (Contact Author)
AQR Capital ( email )
Greenwich, CT
United States
University of Chicago - Booth School of Business ( email )
5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
773-834-2757 (Phone)
773-702-0458 (Fax)

Chicago Booth School of Business Logo

National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
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