The expected returns and valuations of private and public firms

Ilan Cooper, Richard Priestley

Research output: Contribution to journalArticlepeer-review


Characteristics play a similar role in describing returns in private firms as in public firms. This evidence suggests a causal effect of optimal investment underlying the role of characteristics, as private firms do not have stock prices to over- or under-react on. Common factor models largely describe the cross section of investment returns of both types of firms, suggesting that the common factors are likely aggregate risk factors. Finally, the cost of capital and firm valuations are similar across private and public firms.

Original languageEnglish
Pages (from-to)41-57
Number of pages17
JournalJournal of Financial Economics
Issue number1
StatePublished - 1 Apr 2016
Externally publishedYes

Bibliographical note

Publisher Copyright:
© 2016.


  • Cost of capital
  • Investment returns
  • Mispricing
  • Private firms
  • Public firms
  • Q theory
  • Real investment
  • Systematic risk

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics
  • Strategy and Management


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