Journal of Banking and Finance
Journal
Journal of Banking & Finance
ISSN
0378-4266
Type
journal article
Date Issued
2022-01-31
Author(s)
Abstract
When investors commit capital to a private equity fund, the money is not immediately invested but is called by the fund manager throughout an investment period of up to five years. The private equity business model allows fund managers to invest and divest the committed capital during the fund's lifetime at their own discretion, which gives them the flexibility to time the markets. Based on 7,591 private equity deals, which are benchmarked against 14,390 M&A transaction multiples, we find evidence that on average private equity funds are able to create value by timing the financial markets. Market timing ability is not captured by performance measures such as the PME, yet it is a potential source of returns for investors.
Language
English
HSG Classification
contribution to scientific community
Refereed
Yes
Publisher
Elsevier BV
Volume
138
Subject(s)
Division(s)
File(s)![Thumbnail Image]()
Name
1-s2.0-S0378426622000243-main.pdf
Size
659.94 KB
Format
Adobe PDF
Checksum (MD5)
4d9b821cab002af9e328e12ac135b315