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

Jan Bo Jakobsen, Ole Vagn Sørensen

Research output: Working paperResearch

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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 languageEnglish
Place of PublicationFrederiksberg
PublisherInstitut for Finansiering, Copenhagen Business School
Number of pages35
ISBN (Print)8790705327
Publication statusPublished - 2000
SeriesWorking Papers / Department of Finance. Copenhagen Business School
Number2000-2
ISSN0903-0352

Keywords

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

Cite this

Jakobsen, J. B., & Sørensen, O. V. (2000). Decomposing and Testing Long-run Returns: With an Application to Initial Public Offerings in Denmark. Institut for Finansiering, Copenhagen Business School. Working Papers / Department of Finance. Copenhagen Business School, No. 2000-2