The distribution of returns to venture capital is:

A) normal
B) positively skewed
C) negatively skewed
D) binomial

Question

The distribution of returns to venture capital is:

A) normal
B) positively skewed
C) negatively skewed
D) binomial

Quizplus · Accepted Answer

The distribution of returns to venture capital is not normal.The distribution is heavily skewed.For instance,in the Cochrane (2005)study,while the mean return is 698%,the median is dramatically less at 184%.The standard deviation of these returns is a staggering 3282%.These statistics imply that there a few observations in excess of 1000% that create a long but thin positive tail.That is,the distribution of returns looks like a log-normal distribution.Thus,the distribution comprises a bunching of returns either side of zero with a few extreme positive observations.

The Distribution of Returns to Venture Capital Is