Expected Returns to Stock Investments by Angel Investors in Groups

Previous research calculates realised internal rates of return on angel investments but does not estimate expected returns. We present the first estimates of expected returns on angel investments by applying a consistent statistical framework to a new data set. Our sample spans 1972 to 2007 with 419 exited investments. Our results suggest that expected returns on stock for angel investors in groups are about 70% per year in excess of the riskfree rate. These expected returns have a large variance and are heavily skewed, with many losses and occasional extraordinarily high returns.