Decomposing and Testing Long-run Returns: With an Application to Initial Public Offerings in Denmark

Jan Bo Jakobsen; Ole Vagn Sørensen

Decomposing and Testing Long-run Returns: With an Application to Initial Public Offerings in Denmark

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Abstract

An improved method for measuring and testing long-run returns is proposed. The method adjusts for the right-skewed distribution of long-run buy-and-hold by decomposing average cross-sectional buy-and-hold returns into mean components and volatility components. The method is applied to initial public offerings in Denmark. The mean-component under performance of initial public offering stocks compared to the market is 30 percent and significant after five years. Compared to matching firms the under performance of IPO stocks is 13 percent after five years but insignificant.

Original language	English
Place of Publication	Frederiksberg
Publisher	Institut for Finansiering, Copenhagen Business School
Number of pages	35
ISBN (Print)	8790705327
Publication status	Published - 2000

Series	Working Papers / Department of Finance. Copenhagen Business School
Number	2000-2
ISSN	0903-0352

Keywords

Market efficiency
Initial public offerings
Long-run returns
Right skewed distributions
Testing
Volatility filtering

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abstract = "An improved method for measuring and testing long-run returns is proposed. The method adjusts for the right-skewed distribution of long-run buy-and-hold by decomposing average cross-sectional buy-and-hold returns into mean components and volatility components. The method is applied to initial public offerings in Denmark. The mean-component under performance of initial public offering stocks compared to the market is 30 percent and significant after five years. Compared to matching firms the under performance of IPO stocks is 13 percent after five years but insignificant.",

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AB - An improved method for measuring and testing long-run returns is proposed. The method adjusts for the right-skewed distribution of long-run buy-and-hold by decomposing average cross-sectional buy-and-hold returns into mean components and volatility components. The method is applied to initial public offerings in Denmark. The mean-component under performance of initial public offering stocks compared to the market is 30 percent and significant after five years. Compared to matching firms the under performance of IPO stocks is 13 percent after five years but insignificant.

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KW - Aktieudbytte

KW - Aktieafkast

KW - Market efficiency

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KW - Long-run returns

KW - Right skewed distributions

KW - Testing

KW - Volatility filtering

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BT - Decomposing and Testing Long-run Returns

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