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Media type:
E-Article
Title:
Measuring Institutional Investors' Skill at Making Private Equity Investments
Contributor:
CAVAGNARO, DANIEL R.;
SENSOY, BERK A.;
WANG, YINGDI;
WEISBACH, MICHAEL S.
Published:
Wiley Periodicals, Inc., 2019
Published in:
The Journal of Finance, 74 (2019) 6, Seite 3089-3134
Language:
English
ISSN:
0022-1082;
1540-6261
Origination:
Footnote:
Description:
Using a large sample of institutional investors' investments in private equity funds raised between 1991 and 2011, we estimate the extent to which investors' skill affects their returns. Bootstrap analyses show that the variance of actual performance is higher than would be expected by chance, suggesting that some investors consistently outperform. Extending the Bayesian approach of Korteweg and Sorensen, we estimate that a one-standard-deviation increase in skill leads to an increase in annual returns of between one and two percentage points. These results are stronger in the earlier part of the sample period and for venture funds.