Short and Long-term Interactions between Venture Capital Returns and the Macroeconomy: Evidence for the United States
Journal
Review of Quantitative Finance and Accounting
ISSN
0924-865X
ISSN-Digital
1573-7179
Type
journal article
Date Issued
2012-04
Author(s)
Abstract
The main purpose of this paper is to empirically model the influence of macroeconomic and financial variables on the performance of risk capital in the US. We start our investigation using a static long-run equilibrium model. In contrast to previous studies, we analyze the effect of several factors simultaneously within the framework of a vector error correction model (VECM). This allows us to study short- and long-term interactions to overcome the problem of endogeneity, and to discover causal mechanisms. The results show that the value of venture capital investments is positively related to industrial production, the exit channel Nasdaq, and the long-term interest rate. However, the value of venture capital investments is negatively related to the short-term interest rate. According to the short-term dynamics, VEC Granger causality confirms that only industrial production influences venture capital performance, while venture capital returns Granger causes Nasdaq performance.
Language
English
Keywords
Venture capital returns - Macroeconomy - Cointegration test - VECM - Granger causality - Variance decomposition
HSG Classification
contribution to scientific community
Refereed
Yes
Publisher
Springer
Publisher place
Dordrecht
Volume
38
Number
3
Start page
391
End page
410
Pages
20
Subject(s)
Eprints ID
216285