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A Comparative Study of Venture Capital Performance in the US and Europe

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  • Xiaoqing Eleanor Xu

    (Seton Hall University)

Abstract

For the past fifty years in the United States, venture capital (VC) has provided initial funding to innovative entrepreneurial enterprises, while the European venture capital industry has only really emerged over the past decade. Using quarterly data from 1993 to 2003, this paper examines and compares the return and risk performance of venture capital funds in US and Europe. Several results are noteworthy. First, pooled venture capital returns in US and Europe are 3.273% and 0.765% (on a quarterly basis) above the CAPM market risk-adjusted returns, respectively. Second, US venture capital fund performance dominates that of Europe in all measures: mean return, total-risk adjusted return, and market-risk adjusted return. Third, the linkage between US VC fund performance and the US stock market is much stronger than the co-movement between the European VC and European stock market. Finally, the introduction of Euro.NM in 1997 has substantially enhanced the relationship between the venture capital and stock market performance in Europe.

Suggested Citation

  • Xiaoqing Eleanor Xu, 2004. "A Comparative Study of Venture Capital Performance in the US and Europe," Journal of Entrepreneurial Finance, Pepperdine University, Graziadio School of Business and Management, vol. 9(3), pages 61-76, Fall.
  • Handle: RePEc:pep:journl:v:9:y:2004:i:3:p:61-76
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    References listed on IDEAS

    as
    1. Gompers, Paul A, 1995. " Optimal Investment, Monitoring, and the Staging of Venture Capital," Journal of Finance, American Finance Association, vol. 50(5), pages 1461-1489, December.
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    More about this item

    Keywords

    Venture Capital; USA; Europe;

    JEL classification:

    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • O51 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - U.S.; Canada
    • O52 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Europe
    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups

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