@article{b4808dc0b2484d2b9067447f56604c1e,
title = "The Public Market Equivalent and Private Equity Performance",
abstract = "The authors show that the public market equivalent approach is equivalent to assessing the performance of private equity (PE) investments using Rubinstein{\textquoteright}s dynamic version of the CAPM. They developed two insights: (1) one need not compute betas of PE investments, and any changes in PE cash flow betas due to changes in financial leverage, operating leverage, or the nature of the business are automatically taken into account; (2) the public market index used in evaluations should be the one that best approximates the wealth portfolio of the investor considering the PE investment opportunity.",
author = "Morten Sorensen and Ravi Jagannathan",
note = "Funding Information: Stefan Nagel, Ludovic Phalippou, and Per Stromberg for helpful discussions and comments. Morten Sorensen gratefully acknowledges funding by the Danish Council for Independent Research (Det Frie Forskningsr{\aa}d) under the Sapere Aude program through grant number DFF4003-00095. Funding Information: We are grateful to Andrew Ang, Ulf Axelson, Kent Daniel, Larry Glosten, Soohun Kim, Arthur Korteweg, Stefan Nagel, Ludovic Phalippou, and Per Stromberg for helpful discussions and comments. Morten Sorensen gratefully acknowledges funding by the Danish Council for Independent Research (Det Frie Forskningsr{\aa}d) under the Sapere Aude program through grant number DFF4003-00095. Publisher Copyright: {\textcopyright} 2015 CFA Institute.",
year = "2015",
doi = "10.2469/FAJ.V71.N4.4",
language = "English (US)",
volume = "71",
pages = "43--50",
journal = "Financial Analysts Journal",
issn = "0015-198X",
publisher = "CFA Institute",
number = "4",
}