Predicting Returns of Listed Private Equity

20 Pages Posted: 18 Oct 2024 Last revised: 10 Dec 2024

Date Written: September 13, 2024

Abstract

We examine the predictive power of the net asset value (NAV)/price ratio for the LPX50 index, a key benchmark in the field of listed private equity, using monthly data from 2002 to 2024. Using a risk factor model, we demonstrate the index's significant exposure to small-cap and value stocks. Autocorrelation tests indicate market inefficiencies and suggest potential predictability of future returns. Both in-sample and out-of-sample analyses confirm the NAV/price ratio as a significant predictor of future returns, particularly over longer investment horizons and when excluding periods of financial instability. When the index's NAV is relatively high compared to its market price, investors can increase their exposure to value risk and potentially achieve excess returns.

Keywords: Listed Private Equity, Return Prediction, Factor Investing

JEL Classification: G11, G12, G17

Suggested Citation

Enders, Arthur and Werner, Maximilian and Schmedders, Karl and Degosciu, Michel, Predicting Returns of Listed Private Equity (September 13, 2024). Available at SSRN: https://ssrn.com/abstract=4955587 or http://dx.doi.org/10.2139/ssrn.4955587

Arthur Enders (Contact Author)

RWTH Aachen University ( email )

Templergraben 55
52056 Aachen, 52056
Germany

Maximilian Werner

University of Zurich ( email )

Rämistrasse 71
Zürich, CH-8006
Switzerland

IMD ( email )

Ch. de Bellerive 23
P.O. Box 915
CH-1001 Lausanne
Switzerland

Karl Schmedders

IMD ( email )

Ch. de Bellerive 23
P.O. Box 915
CH-1001 Lausanne
Switzerland

Michel Degosciu

LPX GmbH ( email )

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