Private equity's diversification illusion
economic comovement and fair value reporting
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Publication
2014 - ProQuest, UMI Dissertation Publishing, Ann Arbor, MI, Michigan
Language
English
Word Count
12,500 words, Guess
Page Count
50 pages
Identifiers
- Open LibraryOL61493923M
- OCLC Control Number1244885778
Description
"This study examines how financial reporting practices have shaped private equity's claims to diversification. Despite research showing that private equity lacks unique economic exposure, private equity firms and trade associations continue to promote private equity's diversification as a key investment benefit. I show that returns based on prior methods of valuation understate the economic comovement of private equity with the market, creating a diversification illusion. As private equity valuation methodologies have changed private equity returns reveal increased systematic risk and correlation to equity markets. Moreover private equity firms also encounter higher--not lower--costs when accessing capital under new valuation methods, a finding at odds with public-market research."
Description
This study examines how financial reporting practices have shaped private equity's claims to diversification. Despite research showing that private equity lacks unique economic exposure, private equity firms and trade associations continue to promote private equity's diversification as a key investment benefit. I show that returns based on prior methods of valuation understate the economic comovement of private equity with the market, creating a diversification illusion. As private equity valuation methodologies have changed private equity returns reveal increased systematic risk and correlation to equity markets. Moreover private equity firms also encounter higher--not lower--costs when accessing capital under new valuation methods, a finding at odds with public-market research.
Subjects
Other Editions
- Private equity's diversification illusion
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