Nonlinearity and smoothing in venture capital performance data
Performance 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.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Geltner, David Michael, 1991. "Smoothing in Appraisal-Based Returns," The Journal of Real Estate Finance and Economics, Springer, vol. 4(3), pages 327-45, September.
- Cochrane, John H., 2005.
"The risk and return of venture capital,"
Journal of Financial Economics,
Elsevier, vol. 75(1), pages 3-52, January.
- John H. Cochrane, 2001. "The Risk and Return of Venture Capital," NBER Working Papers 8066, National Bureau of Economic Research, Inc.
- Cochrane, John, 2000. "The Risk and Return of Venture Capital," University of California at Los Angeles, Anderson Graduate School of Management qt7qm9h594, Anderson Graduate School of Management, UCLA.
- Walz, Uwe & Cumming, Douglas, 2004.
"Private equity returns and disclosure around the world,"
CFS Working Paper Series
2004/05, Center for Financial Studies (CFS).
- Douglas Cumming & Uwe Walz, 2010. "Private equity returns and disclosure around the world," Journal of International Business Studies, Palgrave Macmillan, vol. 41(4), pages 727-754, May.
- Fisher, Jeffrey D & Geltner, David M & Webb, R Brian, 1994. "Value Indices of Commercial Real Estate: A Comparison of Index Construction Methods," The Journal of Real Estate Finance and Economics, Springer, vol. 9(2), pages 137-64, September.
- C. Beuselinck & M. Deloof & S. Manigart, 2005.
"Private Equity Investments and Disclosure Policy,"
Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium
05/287, Ghent University, Faculty of Economics and Business Administration.
- BEUSELINCK, Christophe & DELOOF, Marc & MANIGART, Sophie, 2004. "Private equity investments and disclosure policy," Working Papers 2004025, University of Antwerp, Faculty of Applied Economics.
- Beuselinck, C. & Deloof, M. & Manigart,S., 2005. "Private equity investments and disclosure policy," Vlerick Leuven Gent Management School Working Paper Series 2005-1, Vlerick Leuven Gent Management School.
- Cumming, Douglas & Dai, Na, 2010. "Local bias in venture capital investments," Journal of Empirical Finance, Elsevier, vol. 17(3), pages 362-380, June.
- Knight John & Satchell Stephen, 2011. "Some New Results for Threshold AR(1) Models," Journal of Time Series Econometrics, De Gruyter, vol. 3(2), pages 1-42, April.
- Dimson, Elroy, 1979. "Risk measurement when shares are subject to infrequent trading," Journal of Financial Economics, Elsevier, vol. 7(2), pages 197-226, June.
- Douglas Cumming, 2008. "Contracts and Exits in Venture Capital Finance," Review of Financial Studies, Society for Financial Studies, vol. 21(5), pages 1947-1982, September.
- Hansen, B.E., 1991.
"Inference when a Nuisance Parameter is Not Identified Under the Null Hypothesis,"
RCER Working Papers
296, University of Rochester - Center for Economic Research (RCER).
- Hansen, Bruce E, 1996. "Inference When a Nuisance Parameter Is Not Identified under the Null Hypothesis," Econometrica, Econometric Society, vol. 64(2), pages 413-30, March.
- Pesaran, M. Hashem & Timmermann, Allan, 2002.
"Market timing and return prediction under model instability,"
Journal of Empirical Finance,
Elsevier, vol. 9(5), pages 495-510, December.
- M. Hashem Pesaran & Allan Timmermann, 2002. "Market timing and return prediction under model instability," LSE Research Online Documents on Economics 24932, London School of Economics and Political Science, LSE Library.
- Allan Timmermann & M. Hashem Pesaran, 2002. "Market Timing and Return Prediction under Model Instability," FMG Discussion Papers dp412, Financial Markets Group.
- Getmansky, Mila & Lo, Andrew & Makarov, Igor, 2003.
"An Econometric Model of Serial Correlation and Illiquidity In Hedge Fund Returns,"
4288-03, Massachusetts Institute of Technology (MIT), Sloan School of Management.
- Getmansky, Mila & Lo, Andrew W. & Makarov, Igor, 2004. "An econometric model of serial correlation and illiquidity in hedge fund returns," Journal of Financial Economics, Elsevier, vol. 74(3), pages 529-609, December.
- Mila Getmansky & Andrew W. Lo & Igor Makarov, 2003. "An Econometric Model of Serial Correlation and Illiquidity in Hedge Fund Returns," NBER Working Papers 9571, National Bureau of Economic Research, Inc.
- David M. Geltner, 1993. "Estimating Market Values from Appraised Values without Assuming an Efficient Market," Journal of Real Estate Research, American Real Estate Society, vol. 8(3), pages 325-346.
- Hansen Bruce E., 1997.
"Inference in TAR Models,"
Studies in Nonlinear Dynamics & Econometrics,
De Gruyter, vol. 2(1), pages 1-16, April.
- Tom Doan, . "THRESHTEST: RATS procedure to perform Hansen's Test for Threshold Break," Statistical Software Components RTS00210, Boston College Department of Economics.
- Bruce E. Hansen, 1996.
"Sample Splitting and Threshold Estimation,"
Boston College Working Papers in Economics
319., Boston College Department of Economics, revised 12 May 1998.
- Pesaran, M Hashem & Timmermann, Allan, 1995. " Predictability of Stock Returns: Robustness and Economic Significance," Journal of Finance, American Finance Association, vol. 50(4), pages 1201-28, September.
- Cumming, Douglas & Dai, Na, 2011. "Fund size, limited attention and valuation of venture capital backed firms," Journal of Empirical Finance, Elsevier, vol. 18(1), pages 2-15, January.
- Susan E. Woodward & Robert E. Hall, 2004. "Benchmarking the Returns to Venture," NBER Working Papers 10202, National Bureau of Economic Research, Inc.
- Cumming, Douglas J. & MacIntosh, Jeffrey G., 2003. "A cross-country comparison of full and partial venture capital exits," Journal of Banking & Finance, Elsevier, vol. 27(3), pages 511-548, March.
- Tanaka, Katsuto & Satchell, S.E., 1989. "Asymptotic Properties of the Maximum-Likelihood and Nonlinear Least-Squares Estimators for Noninvertible Moving Average Models," Econometric Theory, Cambridge University Press, vol. 5(03), pages 333-353, December.
- Andrew C. Harvey, 1990. "The Econometric Analysis of Time Series, 2nd Edition," MIT Press Books, The MIT Press, edition 2, volume 1, number 026208189x, June.
- Pham, Tuan D. & Tran, Lanh T., 1985. "Some mixing properties of time series models," Stochastic Processes and their Applications, Elsevier, vol. 19(2), pages 297-303, April.
- Bollen, Nicolas P. B. & Pool, Veronika K., 2008. "Conditional Return Smoothing in the Hedge Fund Industry," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 43(02), pages 267-298, June.
- Nicolas P.B. Bollen & Robert E. Whaley, 2009. "Hedge Fund Risk Dynamics: Implications for Performance Appraisal," Journal of Finance, American Finance Association, vol. 64(2), pages 985-1035, 04.
- Arthur Korteweg & Morten Sorensen, 2010. "Risk and Return Characteristics of Venture Capital-Backed Entrepreneurial Companies," Review of Financial Studies, Society for Financial Studies, vol. 23(10), pages 3738-3772, October.
- Douglas J. Cumming & Jeffrey G. MacIntosh, 2007. "Mutual funds that invest in private equity? An analysis of labour-sponsored investment funds," Cambridge Journal of Economics, Oxford University Press, vol. 31(3), pages 445-487, May.
- 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.
- Michael D. McKenzie & William H. Janeway, 2011. "Venture capital funds and the public equity market," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 51(3), pages 764-786, 09.
When requesting a correction, please mention this item's handle: RePEc:eee:empfin:v:19:y:2012:i:5:p:782-795. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.