Purpose: This paper analyzes the characteristics of stochastic volatility processes in globally listed private equity markets, which are represented by nine global, regional, and style indices, and reveals transmissions in the conditional variances between the different markets, based on weekly data covering the period January 2011 to December 2020. Methodology: The study uses the GARCH(p,q) model, and its EGARCH and GARCH-in-mean extensions. Findings: The estimates of the volatility models GARCH, EGARCH, and GARCH-M for testing the stylized properties persistence, asymmetry, mean reversion, and risk premium lead to very different results, depending on the respective LPE index. Practical implications: The knowledge of conditional volatilities of listed private equity returns as well as the detection of volatility transmissions between the different listed private equity markets under investigation serve to support asset allocation decisions with respect to risk management or portfolio allocation. Hence, our findings are important for all kinds of investors and asset managers who consider investments in listed private equity. Originality/value: The authors present a novel study that examines the conditional variance for globally listed private equity markets by using LPX indices, offering valuable insight into this growing asset class.
Authors: Lars Tegtmeier
Publication date: 29 March 2022
Published in: Studies in Economics and Finance, Emerald Group Publishing Limited
Volume/ Ausgabe: Volume 40, Issue 1
Source download link: https://www.emerald.com/insight/content/doi/10.1108/SEF-04-2021-0129/full/html
