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Profitability of private equity: mean reversion and transitory shocks

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  • Luis Alberiko Gil-Alana

    (University of Navarra
    Universidad Francisco de Vitoria)

  • Francisco Puertolas-Montanes

    (Universidad Francisco de Vitoria)

Abstract

This paper deals with the analysis of the statistical properties of the profitability yielded by Private Equity from a fractionally integrated viewpoint. Using quarterly data from 1981q2 to 2021q3, the results support the hypothesis of stationarity and mean reversion in all cases; however, we observe differences in the degree of persistence across regions, Europe being the closest to short memory while the US shows the highest degree of long range dependence and thus the longer lasting effects of shocks. Some policy recommendations of the results obtained are included at the end of the manuscript.

Suggested Citation

  • Luis Alberiko Gil-Alana & Francisco Puertolas-Montanes, 2023. "Profitability of private equity: mean reversion and transitory shocks," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 47(2), pages 458-471, June.
    • Handle: RePEc:spr:jecfin:v:47:y:2023:i:2:d:10.1007_s12197-022-09606-7
    DOI: 10.1007/s12197-022-09606-7
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    More about this item

    Keywords

    Profits; Long memory; Fractional integration; Europe; Shocks;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C59 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Other
    • Y10 - Miscellaneous Categories - - Data: Tables and Charts - - - Data: Tables and Charts

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