Abstract
I examine the performance of 936 buyout (BO) funds incepted during 1980−2015 using Generalized Public Market Equivalent (GPME) proposed in Korteweg and Nagel (2016). The statistical inference implemented within the GMM framework suffers from the problem of poor identification. To solve this I introduce a Bayesian estimation step to calculate GPME. Even though, the uncertainty regarding how to choose the public market index for comparison remains. To address the benchmarking challenge I use a pricing kernel tailored specifically to the geographical and industrial characteristics of the fund. On average, BO funds do not show the outperformance after using this newly proposed approach.
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