Private equity benchmarks and portfolio optimization |
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Authors: | Douglas Cumming,Lars Helge Haß ,Denis Schweizer |
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Affiliation: | 1. York University – Schulich School of Business, 4700 Keele Street, Toronto, Ontario, Canada M3J 1P3;2. Lancaster University Management School, Lancaster University, Lancaster, LA1 4YX, United Kingdom;3. WHU – Otto Beisheim School of Management, Burgplatz 2, 56179 Vallendar, Germany |
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Abstract: | Portfolio optimization using private equity is typically based on one of three indices: listed private equity, transaction-based private equity, or appraisal value-based private equity indices. However, we show that none of these indices is fully suitable for portfolio optimization. We introduce here a new benchmark index for venture capital and buyouts, which is updated monthly, adjusted for autocorrelation (de-smoothing), and available contemporaneously. We illustrate how our benchmark enables superior quantitative portfolio optimization. |
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Keywords: | G24 |
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