This paper examines the determinants of premia to net asset values for global listed private equity (LPE) over the period of 2000 to 2013. Factors for valuation of traditional private equity and the closed-end fund puzzle are tested to explain the longrun discount in LPE of 18.13%. Specific emphasis is laid on factors influencing LPE premia during the economic crisis from 2007 to 2009 and the information content of historical premia and net asset value (NAV) returns. The findings suggest that both traditional and behavioral finance factors of private equity and closed-end fund valuation such as investor sentiment determine premia to NAV. During crisis, sentiment has a weaker influence than expected. Investors update their opinion about management skills based on past NAV returns and exhibit rational expectations about future performance based on historic premia. During the crisis from 2007-2009, information content of past performance declines, which reduces the learning effect of investors about management ability.
Authors: Simone Hollenwaeger
Publication date: 5 October 2015
Published in: Corporate Finance
Volume/ Ausgabe: Volume 10
Source download link: https://research.owlit.de/document/499d70cf-f479-3629-a256-5172127038b5
