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An Index For Venture Capital, 1987-2003

Author

Listed:
  • Hwang Min

    (National University of Singapore)

  • Quigley John M.

    (University of California, Berkeley)

  • Woodward Susan E.

    (Sand Hill Econometrics)

Abstract

In this paper we build an index of value for venture capital. Our approach overcomes the problems of intermittent, infrequent pricing of private company deals by using a repeat valuation model to build the index, and it corrects for selection bias in the reporting of values. We use a unique data set from Sand Hill Econometrics which reports 50,734 funding events, which include the contemporaneous valuations of 9,092 private equity firms disclosed 19,208 times over almost 17 years. The resulting index measures the return and risk for venture capital. Its covariance with other asset classes from 1987 through 2003 enables us to explore the role of venture capital in diversified portfolios during a period of increased importance of venture capital in the economy.

Suggested Citation

  • Hwang Min & Quigley John M. & Woodward Susan E., 2005. "An Index For Venture Capital, 1987-2003," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 4(1), pages 1-45, November.
    • Handle: RePEc:bpj:bejeap:v:contributions.4:y:2005:i:1:n:13
    DOI: 10.2202/1538-0645.1180
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    Citations

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    Cited by:

    1. Narasimhan Jegadeesh & Roman Kräussl & Joshua M. Pollet, 2015. "Risk and Expected Returns of Private Equity Investments: Evidence Based on Market Prices," The Review of Financial Studies, Society for Financial Studies, vol. 28(12), pages 3269-3302.
    2. Kasper Meisner Nielsen, 2011. "The Return to Direct Investment in Private Firms: New Evidence on the Private Equity Premium Puzzle," European Financial Management, European Financial Management Association, vol. 17(3), pages 436-463, June.
    3. Brian H. Boyer & Taylor D. Nadauld & Keith P. Vorkink & Michael S. Weisbach, 2023. "Discount‐Rate Risk in Private Equity: Evidence from Secondary Market Transactions," Journal of Finance, American Finance Association, vol. 78(2), pages 835-885, April.
    4. McKenzie, Michael & Satchell, Stephen & Wongwachara, Warapong, 2014. "Converting true returns into reported returns: A general theory of linear smoothing and anti-smoothing," Journal of Empirical Finance, Elsevier, vol. 28(C), pages 215-229.
    5. Glaeser, Edward L., 2014. "Understanding housing: The intellectual legacy of John Quigley," Regional Science and Urban Economics, Elsevier, vol. 47(C), pages 3-12.
    6. Mohan, Nancy & Zhang, Ting, 2014. "An analysis of risk-taking behavior for public defined benefit pension plans," Journal of Banking & Finance, Elsevier, vol. 40(C), pages 403-419.
    7. McKenzie, Michael & Satchell, Stephen & Wongwachara, Warapong, 2012. "Nonlinearity and smoothing in venture capital performance data," Journal of Empirical Finance, Elsevier, vol. 19(5), pages 782-795.

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