Profitability of private equity: mean reversion and transitory shocks
Keywords: 
Profits
Long memory
Fractional integration
Europe
Shocks
Issue Date: 
2023
Publisher: 
Springer
Project: 
info:eu-repo/grantAgreement/AEI/Proyectos I+D/PID2020-113691RB-I00/[ES]/INTEGRACION FRACCIONAL: AVANCES TEORICOS Y DESARROLLOS EMPIRICOS
ISSN: 
1938-9744
Note: 
This article is licensed under a Creative Commons Attribution 4.0 International License
Citation: 
Gil-Alana, L.A. (Luis A.); Puertolas-Montanes, F. (Francisco). "Profitability of private equity: mean reversion and transitory shocks". Journal of Economics and Finance. 47, 2023, 458 - 471
Abstract
This paper deals with the analysis of the statistical properties of the profitability yielded by Private Equity from a fractionally integrated viewpoint. Using quarterly data from 1981q2 to 2021q3, the results support the hypothesis of stationarity and mean reversion in all cases; however, we observe differences in the degree of persistence across regions, Europe being the closest to short memory while the US shows the highest degree of long range dependence and thus the longer lasting effects of shocks. Some policy recommendations of the results obtained are included at the end of the manuscript.

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