The Private Equity Premium Puzzle Revisited-New Evidence on the Role of Heterogeneous Risk Attitudes
The private equity premium puzzle revisited
Bibliographic Data
| ID | 9726892 |
|---|---|
| Authors | Frank M Fossen (0000-0002-5908-8049, German Institute for Economic Research, corresponding author) |
| Year | 2011 |
| Volume | 78 |
| Issue | 312 |
| Pages | 656-675 |
| Publication date | 2011-10-01 |
| Peer Reviewed | Yes |
| Open Access | Yes |
| Type | ARTICLE |
| Venue | Economica (JOURNAL) |
| Journal identifiers | ISSN: 0013-0427 • E-ISSN: 1468-0335 |
| Publisher | Wiley (PUBLISHER • GB) |
| DOI | 10.1111/j.1468-0335.2010.00864.x |
| OpenAlex | W2157703847 |
| Language | EN |
| Citations received | 5 |
| References cited | 25 |
The empirical finding that entrepreneurs invest a large share of their wealth in their own firms, despite comparably low returns and high risk, has become known as the private equity premium puzzle. This paper provides evidence supporting the hypothesis that lower risk-aversion of entrepreneurs, and thus not necessarily credit constraints, may explain this puzzle. The analysis is based on a representative panel survey for Germany, which provides information on asset portfolios and experimentally validated risk attitudes. The results show that both the ownership probability and the conditional portfolio share of private business equity significantly increase with higher risk-tolerance
Actuarial science · Asset (computer security) · Business · Capital asset pricing model · Econometrics · Economics · Empirical evidence · Equity (law) · Equity premium puzzle · Equity risk · Expected utility hypothesis · Financial economics · Panel data · Portfolio · Private equity · Private information retrieval · Risk aversion (psychology) · Risk premium · Corporate Finance and Governance · Finance · Firm Innovation and Growth · Private Equity and Venture Capital
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| Unique citing works | 5 |
|---|---|
| Citations per year | 1 |
| Citation span | 2021 - 2025 (5) |
| Citation velocity | recent |
| Highly cited | No |
| Citation types | Neutral: 5 |