Asset Pricing Theory Is Applied To The Limitations And Direction Of Innovation In The Venture Capital Study

The rise of venture capital pushes forward the development of scientific and technological innovation, now becoming an important impetus for economic development all around the world. Behind the rapid development of venture capital keeping pace with science and technology industry, the industry itself bears a huge financial and economic value, but also bears hidden dangers caused by the disorder of the asset pricing and risk management system in venture investment and financing activities. This study intends to through in-depth analysis of venture capital behavior and the logic of asset pricing theory, to a certain degree analyze and solve the applicability of standard asset pricing model in venture capital.This study mainly answers two questions:(1) whether standard asset pricing theory can apply to venture capital, in what aspects there are the major limitations; (2) whether the standard asset pricing theory can be improved to apply to venture capital, how the model should be set, what can be the direction of innovation. For the first question, the paper first analyzes the ideological framework and components of the standard asset pricing theory; then on the basis of comparison, the paper studies the characteristics of venture capital process in-depth, namely, in one hand, asset pricing in venture capital is the pricing led by entrepreneurial risk, in the other hand, investment behavior itself also contains and creates a certain value and the value of risky assets has been significantly affected by the investment and financing contract; from these, we get eight limitations of the standard theory when it is applied to the venture capital. For the second question, from the perspective of the real-world practical experience, this paper provides pricing ideas by introducing the international successful cases; then according to the characteristics of venture capital, raises the applicability of each specific model in the various stages of venture capital; afterwards, study how to construct pricing model applied to venture capital through adjusting assumptions and model specification of discounted cash flow model and the real option model, mainly including how to adjust the discount rate based on the entrepreneurial risk, how to predict the future cash flows of venture capital, what kind of real options are included in venture capital, how to assess the value of these real options, etc.; finally, in consideration of the research capacity and time constraints, for the defects of this research and the demand for practice of asset pricing in venture capital, the paper sets out the future direction of innovation.