The Better Angels of our Nature?

Friday November 17, 2023


This paper studies the investment behavior of angel investors in private and public markets. Their angel investment returns in innovative firms are highly skewed and exhibit pronounced performance persistence that is unlikely to be driven by contemporaneous exposure to economy-wide shocks. Investor fixed effects absorb approximately 45%of the total variation in returns, indicating that accounting for persistent individual differences is critical for understanding this market. We find evidence that some angel investors have access to better deal flow than other investors, such that, even if they choose randomly, they are choosing from a set of potential investments with better ex ante returns than those associated with the deals available to other investors. When comparing angel investors’ returns in the public market, a market where all investors face more or less the same ex ante distribution of investments, we find evidence of better due diligence skills for some of them.


Johan Karlsen, Norwegian School of Economics
Katja Kisseleva, Frankfurt School of Finance & Management
Aksel Mjøs, Norwegian School of Economics
David Robinson, Duke and NBER