Once adjusted for risk,the beta estimate of venture capital firms is approximately:

A) $ 0.7$
B) $ 1.0 $
C) $ 1.4 $
D) $ 1.7$

Question

Once adjusted for risk,the beta estimate of venture capital firms is approximately:

A) $ 0.7$
B) $ 1.0 $
C) $ 1.4 $
D) $ 1.7$

Quizplus · Accepted Answer

Gompers and Lerner (1997)note that venture capital funds tend to exhibit high betas (as per systematic risk in a CAPM sense).Their average beta estimate of venture funds is 1.4,while Cochrane (2005)reports an average beta of 1.7.Once risk adjustments are made to returns,the returns drop to around conventional levels.For instance,Kaplan and Schoar conclude that venture capital returns are roughly equal to returns on the market (such as measured by the S&P500 index).

Once Adjusted for Risk,the Beta Estimate of Venture Capital Firms 0.7 0.70.7

Once Adjusted for Risk,the Beta Estimate of Venture Capital Firms $0.7$