Nonlinearity and smoothing in venture capital performance data
AbstractPerformance indices for illiquid investments are known to suffer from returns smoothing, and the purpose of this paper is to investigate the presence and nature of such smoothing in the context of venture capital. We find that while the standard techniques may or may not indicate the presence of smoothing, significant evidence of smoothing exists when a nonlinear regime-dependent model is specified. Further, the model suggests the presence of regime-specific responsiveness of venture capital returns whereby different weights are placed on newly arrived information in different regimes.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Empirical Finance.
Volume (Year): 19 (2012)
Issue (Month): 5 ()
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Web page: http://www.elsevier.com/locate/jempfin
Regime switching; Threshold autoregressive model; Venture capital returns;
Find related papers by JEL classification:
- C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models
- G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
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