The Performance of Private Equity Funds: Does Diversification Matter?

This paper is the first systematic analysis of the impact of diversification on the performance of private equity funds. A unique data set allows the exact evaluation of diversification across the dimensions financing stages, industries, and countries. Very different levels of diversification can be observed across sample funds. While some funds are highly specialized others are highly diversified. The empirical results show that the rate of return of private equity funds declines with diversification across financing stages, but increases with diversification across industries. Accordingly, the fraction of portfolio companies which have a negative return or return nothing at all, increase with diversification across financing stages. Diversification across countries has no systematic effect on the performance of private equity funds

The price of rapid exit in venture capital-backed IPOs

This paper proposes an explanation for two empirical puzzles surrounding initial public offerings (IPOs). Firstly, it is well documented that IPO underpricing increases during “hot issue” periods. Secondly, venture capital (VC) backed IPOs are less underpriced than non-venture capital backed IPOs during normal periods of activity, but the reverse is true during hot issue periods: VC backed IPOs are more underpriced than non-VC backed ones. This paper shows that when IPOs are driven by the initial investor’s desire to exit from an existing investment in order to finance a new venture, both the value of the new venture and the value of the existing firm to be sold in the IPO drive the investor’s choice of price and fraction of shares sold in the IPO. When this is the case, the availability of attractive new ventures increases equilibrium underpricing, which is what we observe during hot issue periods. Moreover, I show that underpricing is affected by the severity of the moral hazard problem between an investor and the firm’s manager. In the presence of a moral hazard problem the degree of equilibrium underpricing is more sensitive to changes in the value of the new venture. This can explain why venture capitalists, who often finance firms with more severe moral hazard problems, underprice IPOs less in normal periods, but underprice more strongly during hot issue periods. Further empirical implications relating the fraction of shares sold and the degree of underpricing are presented

Strategies used as spectroscopy of financial markets reveal new stylized facts

We propose a new set of stylized facts quantifying the structure of financial markets. The key idea is to study the combined structure of both investment strategies and prices in order to open a qualitatively new level of understanding of financial and economic markets. We study the detailed order flow on the Shenzhen Stock Exchange of China for the whole year of 2003. This enormous dataset allows us to compare (i) a closed national market (A-shares) with an international market (B-shares), (ii) individuals and institutions and (iii) real investors to random strategies with respect to timing that share otherwise all other characteristics. We find that more trading results in smaller net return due to trading frictions. We unveiled quantitative power laws with non-trivial exponents, that quantify the deterioration of performance with frequency and with holding period of the strategies used by investors. Random strategies are found to perform much better than real ones, both for winners and losers. Surprising large arbitrage opportunities exist, especially when using zero-intelligence strategies. This is a diagnostic of possible inefficiencies of these financial markets.Comment: 13 pages including 5 figures and 1 tabl

Mitigation of Moral Hazard and Adverse Selection in Venture Capital Financing: The Influence of the Country’s Institutional Setting

A venture capitalist (VC) needs to trade off benefits and costs when attempting to mitigate agency problems in their investor-investee relationship. We argue that signals of ventures complement the VC’s capacity to screen and conduct a due diligence during the pre-investment phase, but its attractiveness may diminish in institutional settings supporting greater transparency. Similarly, whereas a VC may opt for contractual covenants to curb potential opportunism by ventures in the post-investment phase, this may only be effective in settings supportive of shareholder rights enforcement. Using an international sample of VC contracts, our study finds broad support for these conjectures. It delineates theoretical and practical implications for how investors can best deploy their capital in different institutional settings whilst nurturing their relationships with entrepreneurs

Social Preferences, Skill Segregation and Wage Dynamics

We study the earning structure and the equilibrium asignment of workers to firms in a model in which workers have social preferences, and skills are perfectly substitutable in production. Firms offer long-term contracts, and we allow for frictions in the labour market in the form of mobility costs. The model delivers specific predictions about the nature of worker flows, about the characteristic of workplace skill segregation, and about wage dispersion both within and cross firms. We shows that long-term contracts in the resence of social preferences associate within-firm wage dispersion with novel "internal labour market" features such as gradual promotions, productivity-unrelated wage increases, and downward wage flexibility. These three dynamic features lead to productivity-unrelated wage volatily within firms.Publicad

Internal and external forcing of multidecadal Atlantic climate variability over the past 1,200 years

The North Atlantic experiences climate variability on multidecadal scales, which is sometimes referred to as Atlantic multidecadal variability. However, the relative contributions of external forcing such as changes in solar irradiance or volcanic activity and internal dynamics to these variations are unclear. Here we provide evidence for persistent summer Atlantic multidecadal variability from AD 800 to 2010 using a network of annually resolved terrestrial proxy records from the circum-North Atlantic region. We find that large volcanic eruptions and solar irradiance minima induce cool phases of Atlantic multidecadal variability and collectively explain about 30% of the variance in the reconstruction on timescales greater than 30 years. We are then able to isolate the internally generated component of Atlantic multidecadal variability, which we define as the Atlantic multidecadal oscillation. We find that the Atlantic multidecadal oscillation is the largest contributor to Atlantic multidecadal variability over the past 1,200 years. We also identify coherence between the Atlantic multidecadal oscillation and Northern Hemisphere temperature variations, leading us to conclude that the apparent link between Atlantic multidecadal variability and regional to hemispheric climate does not arise solely from a common response to external drivers, and may instead reflect dynamic processes

European summer temperatures since Roman times

The spatial context is critical when assessing present-day climate anomalies, attributing them to potential forcings and making statements regarding frequency and severity in the long-term perspective. Recent initiatives have expanded the number of high-quality proxy-records and developed new reconstruction methods. These advances allow more rigorous regional past temperature reconstructions and the possibility of evaluating climate models on policy-relevant, spatio-temporal scales. We provide a new proxy-based, annually-resolved, spatial reconstruction of the European summer temperature fields back to 755 CE based on a Bayesian hierarchical modelling (BHM), together with estimates of the European mean temperature variation since 138 BCE based on Composite-plus-Scaling. Our reconstructions compare well with independent instrumental and proxy-based temperature estimates, but suggest a larger amplitude in summer temperature variability than previously reported. Temperature differences between the medieval period, the recent period and Little Ice Age are larger in reconstructions than simulations. This may indicate either inflated variability of the reconstructions, a lack of sensitivity to external forcing on sub-hemispheric scales in the climate models and/or an underestimation of internal variability on centennial and longer time scales including the representation of internal feedback mechanisms

Neue linguistische Methoden und arbeitstechnische Verfahren in der Erschliessung der ägyptischen Grammatik

15 páginas, 1 tabla, 6 figuras.Does diversity beget diversity? Diversity includes a diversity of concepts because it is linked to variability in and of life and can be applied to multiple levels. The connections between multiple levels of diversity are poorly understood. Here, we investigated the relationships between genetic, bacterial, and chemical diversity of the endangered Atlanto-Mediterranean sponge Spongia lamella. These levels of diversity are intrinsically related to sponge evolution and could have strong conservation implications. We used microsatellite markers, denaturing gel gradient electrophoresis and quantitative polymerase chain reaction, and high performance liquid chromatography to quantify genetic, bacterial, and chemical diversity of nine sponge populations. We then used correlations to test whether these diversity levels covaried. We found that sponge populations differed significantly in genetic, bacterial, and chemical diversity. We also found a strong geographic pattern of increasing genetic, bacterial, and chemical dissimilarity with increasing geographic distance between populations. However, we failed to detect significant correlations between the three levels of diversity investigated in our study. Our results suggest that diversity fails to beget diversity within a single species and indicates that a diversity of factors regulates a diversity of diversities, which highlights the complex nature of the mechanisms behind diversityResearch funded by grants from the Agence Nationale de la Recherche (ECIMAR), from the Spanish Ministry of Science and Technology SOLID (CTM2010-17755) and Benthomics (CTM2010-22218-C02-01) and the BIOCAPITAL project (MRTN-CT-2004-512301) of the European Union. This is a contribution of the Consolidated Research Group ‘‘Grupo de Ecologı´a Bento´nica,’’ SGR2009-655.Peer reviewe