Returns and Risks to Private Equity

64 Pages Posted: 9 Mar 2011 Last revised: 25 Nov 2013

Maria-Teresa Marchica

University of Manchester - Manchester Business School

Roberto Mura

University of Manchester - Manchester Business School

Date Written: November 24, 2013

Abstract

We assess returns and risks to private equity investors from 35 countries for the time interval of 1996-2008. We find that returns to private equity (measured as return on book equity (ROE)) are significantly higher than ROEs to publicly traded equity. Using customary measures to adjust for risk, the spread between private and public equity returns is sufficiently high to justify the idiosyncratic risk borne by undiversified private equity investors. Despite their apparently high undiversified portfolio risk, investors in non-publicly traded firms appear to allocate their capital efficiently.

Keywords: Private equity

JEL Classification: G10, G15, G30

Suggested Citation

Marchica, Maria-Teresa and Mura, Roberto, Returns and Risks to Private Equity (November 24, 2013). Available at SSRN: https://ssrn.com/abstract=1781070 or http://dx.doi.org/10.2139/ssrn.1781070

Maria-Teresa Marchica (Contact Author)

University of Manchester - Manchester Business School ( email )

Crawford House
Oxford Road
Manchester M13 9PL
United Kingdom
+44(0)1612750121 (Phone)
+44(0)1612754023 (Fax)

HOME PAGE: http://www.personal.mbs.ac.uk/mmarchica/index.htm

Roberto Mura

University of Manchester - Manchester Business School ( email )

Crawford House
Oxford Road
Manchester, Lancashire M13 9PL
United Kingdom
+44 (0) 161 275 4023 (Fax)

HOME PAGE: http://www.robertomura.com

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