Tag: G15

Modeling the volatilities of globally listed PE markets

Posted on | by Robin Jakob

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

Testing the Efficiency of Globally Listed PE Markets

Posted on | by Robin Jakob

This study is the first to investigate the efficient market hypothesis in its weak form and the random walk behaviour of globally listed private equity (LPE) markets represented by nine global, regional, and style indices based on weekly data covering the period from January 2004 to December 2020. Autocorrelation tests, variance ratio tests, and a non-parametric runs test are employed. The results of the autocorrelation tests and the variance ratio tests tend to correspond for all indices, and they reject the random walk hypothesis for the returns of all LPE indices under investigation. In contrast, the runs test for direct weak-form market efficiency cannot reject the null hypothesis of a random walk process for almost all LPE indices under investigation. Furthermore, there is no evidence that the market efficiency of globally listed private equity markets has improved after the global financial crisis. Due to the fact that the rapidly growing asset class of LPE as a form of private equity is still relatively unknown, the implications of the results of our paper are relevant for investors, policy makers, and academics alike. In addition, the results provide valuable insights to better understand the emerging asset class of LPE.

Authors: Lars Tegtmeier
Publication date: 8 July 2021
Published in: Journal of Risk and Financial Management
Volume/ Ausgabe: Volume 14, Issue 7
Source download link: https://www.mdpi.com/1911-8074/14/7/313

“Sell in May” effect: an investigation of Listed PE

Posted on | by Robin Jakob

This paper aims to test the so-called “Sell in May” effect in globally listed private equity markets based on monthly data covering the period 2004-2017. Methodology: Ordinary least squares regressions, generalized autoregressive conditional heteroscedasticity (GARCH) regressions, and robust regressions are used to investigate the existence of the “Sell in May” effect in globally listed private equity markets. Additionally, we conduct robustness checks by dividing our sample period into two subperiods: pre-financial and post-financial crisis periods. Findings: We find limited statistically significant evidence for the “Sell in May” effect. In particular, we observed a statistically significant “Sell in May” effect when taking time-varying volatility into account. These findings indicate that the “Sell in May” effect is driven by time-varying volatility. By contrast, economic significance as measured by visual return inspection and the magnitude of the estimated “Sell in May” coefficients in combination with their positive signs was found to be considerable. Practical implications: Our findings are important for all kinds of investors and asset managers who are considering investing in listed private equity. Originality/value: The authors present a novel study that examines the “Sell in May” effect for globally listed private equity markets by using LPX indices, offering valuable insight into this growing asset class.

Authors: Carmen Bachmann / Lars Tegtmeier / Johannes Gebhardt / Marcel Steinborn
Publication date: 23 May 2019
Published in: Managerial Finance
Volume/ Ausgabe: Volume 45, Issue 6
Source download link: https://www.emerald.com/insight/content/doi/10.1108/MF-07-2018-0322/full/html