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Explaining Private Equity Fund Performance: Behavioral Finance as a Predictor of Investment Returns and Decision Science as a Strategic Competitive Advantage.

Record Type:	Electronic resources : Monograph/item
Title/Author:	Explaining Private Equity Fund Performance: Behavioral Finance as a Predictor of Investment Returns and Decision Science as a Strategic Competitive Advantage.
Author:	Rafalovich, Tim Paul.
Published:	Ann Arbor : ProQuest Dissertations & Theses, 2022
Description:	176 p.
Notes:	Source: Dissertations Abstracts International, Volume: 84-07, Section: A.
Notes:	Advisor: Cromer, Kenneth;Guzman, Indira.
Contained By:	Dissertations Abstracts International84-07A.
Subject:	Finance.
Online resource:	http://pqdd.sinica.edu.tw/twdaoapp/servlet/advanced?query=30246223
ISBN:	9798368434254

Explaining Private Equity Fund Performance: Behavioral Finance as a Predictor of Investment Returns and Decision Science as a Strategic Competitive Advantage.
Rafalovich, Tim Paul.

Explaining Private Equity Fund Performance: Behavioral Finance as a Predictor of Investment Returns and Decision Science as a Strategic Competitive Advantage. - Ann Arbor : ProQuest Dissertations & Theses, 2022 - 176 p.

Source: Dissertations Abstracts International, Volume: 84-07, Section: A.

Thesis (Ph.D.)--Trident University International, 2022.

This item must not be sold to any third party vendors.

Decision science predicts private equity and venture capital fund performance and is an underutilized tool for sustainable competitive advantage. This quantitative research study tested behavioral finance, specifically cognitive biases, social factors, emotions, pattern inertia, and cognitive errors and its impact on investment performance. Twelve factors were examined, including anchoring, self-interest, groupthink, availability, champion, sunk cost, loss aversion, confirmation bias, saliency biases, emotional attachment, disaster neglect and overconfidence bias and their effect on fund investment performance. Results from 206 buyout firms, private debt funds, and venture capital groups showed that private equity is subject to all 12 forms of cognitive biases, but the evidence was inconclusive on the decision flaw constructs and their correlation to negative fund performance. Indicators showed a significant and negative correlation between fund quartile performance and several cognitive bias items, implying companies with higher performance were less affected by behavioral biases; respondents were less likely to agree that their firm experiences cognitive bias items if they were older in age; junior levels employees suggested higher influences from cognitive biases; buyout strategies were more likely to experience overconfidence bias than other fund types. Qualitative comments point out the reality that every private equity group is subject to decision biases, but some use them as a strategic competitive advantage while others are blind to their effects. Future research can build on promising results for a new behavioral finance scales in a natural finance setting, rather than a theoretical environment. In conclusion, research demonstrated that fund managers may remain naive to decision errors, while others apply decisions to gain competitive advantage.

ISBN: 9798368434254Subjects--Topical Terms:

183252
Finance.
Subjects--Index Terms:

Behavioral finance

Explaining Private Equity Fund Performance: Behavioral Finance as a Predictor of Investment Returns and Decision Science as a Strategic Competitive Advantage.
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520 $a Decision science predicts private equity and venture capital fund performance and is an underutilized tool for sustainable competitive advantage. This quantitative research study tested behavioral finance, specifically cognitive biases, social factors, emotions, pattern inertia, and cognitive errors and its impact on investment performance. Twelve factors were examined, including anchoring, self-interest, groupthink, availability, champion, sunk cost, loss aversion, confirmation bias, saliency biases, emotional attachment, disaster neglect and overconfidence bias and their effect on fund investment performance. Results from 206 buyout firms, private debt funds, and venture capital groups showed that private equity is subject to all 12 forms of cognitive biases, but the evidence was inconclusive on the decision flaw constructs and their correlation to negative fund performance. Indicators showed a significant and negative correlation between fund quartile performance and several cognitive bias items, implying companies with higher performance were less affected by behavioral biases; respondents were less likely to agree that their firm experiences cognitive bias items if they were older in age; junior levels employees suggested higher influences from cognitive biases; buyout strategies were more likely to experience overconfidence bias than other fund types. Qualitative comments point out the reality that every private equity group is subject to decision biases, but some use them as a strategic competitive advantage while others are blind to their effects. Future research can build on promising results for a new behavioral finance scales in a natural finance setting, rather than a theoretical environment. In conclusion, research demonstrated that fund managers may remain naive to decision errors, while others apply decisions to gain competitive advantage.
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