Decomposing and Testing Long-term Returns: An Application on Danish IPOS

Jan Bo Jakobsen, Ole Vagn Sørensen

Research output: Contribution to journalJournal articleResearchpeer-review


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% and significant after 5 years. Compared to matching firms the under performance of IPO stocks is 13% after 5 years but insignificant.
Original languageEnglish
JournalEuropean Financial Management
Issue number3
Pages (from-to)393-417
Number of pages25
Publication statusPublished - 2001


  • Initial public offerings
  • Long-run returns
  • Right skewed distributions

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