Do Private Equity Managers Have Superior Information on Public Markets?

Journal of Financial and Quantitative Analysis

89 Pages Posted: 2 Jul 2016 Last revised: 20 Aug 2020

See all articles by Oleg Gredil

Oleg Gredil

Tulane University - A.B. Freeman School of Business

Multiple version iconThere are 2 versions of this paper

Date Written: May 31, 2018

Abstract

Using cash flows from a large sample of buyout and venture funds, I show that private equity (PE) distributions predict returns in the industries of funds' specialization. My tests distinguish timing skill from reactions to market conditions and spillover effects of PE activity. Fund managers tend to sell at the industry peaks only when they have performance fees to harvest and foresee public firms' future earnings rather than the variation in discount rates. These results help better understand the performance of PE funds and have implications for manager selection, contract design and the PE role in modern capital markets.

Keywords: Private Equity, Venture Capital, Market Timing, Agency Costs, Portfolio Choice, Institutional Investors, Simulation-based Estimation

JEL Classification: G23, G24, G30

Suggested Citation

Gredil, Oleg, Do Private Equity Managers Have Superior Information on Public Markets? (May 31, 2018). Journal of Financial and Quantitative Analysis, Available at SSRN: https://ssrn.com/abstract=2802640 or http://dx.doi.org/10.2139/ssrn.2802640

Oleg Gredil (Contact Author)

Tulane University - A.B. Freeman School of Business ( email )

7 McAlister Drive
New Orleans, LA 70118
United States

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