Nonlinearity and smoothing in venture capital performance data

Michael McKenzie*, Stephen Satchell, Warapong Wongwachara

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

2 Citations (Scopus)


Performance indices for illiquid investments are known to suffer from returns smoothing, and the purpose of this paper is to investigate the presence and nature of such smoothing in the context of venture capital. We find that while the standard techniques may or may not indicate the presence of smoothing, significant evidence of smoothing exists when a nonlinear regime-dependent model is specified. Further, the model suggests the presence of regime-specific responsiveness of venture capital returns whereby different weights are placed on newly arrived information in different regimes.

Original languageEnglish
Pages (from-to)782-795
Number of pages14
JournalJournal of Empirical Finance
Issue number5
Publication statusPublished - 2012


  • Regime switching
  • Threshold autoregressive model
  • Venture capital returns


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