Risk and return in private equity

This chapter is both a primer on estimation methods for assessing risk and return in private equity and a survey of the empirical literature. Most private equity investments are made by private funds that raise capital from institutions and wealthy individuals. Performance data is collected either at the fund-level or at the level of the underlying investments. These data sources have distinct econometric issues, and the chapter describes empirical methods developed for each type of data. The risk and return properties of the small segment of publicly traded vehicles is also considered. The chapter concludes with directions for future research.