Decomposing and Testing Long‐term Returns: an Application on Danish IPOs

Jan Bo Jakobsen and Ole Sørensen

European Financial Management, 2001, vol. 7, issue 3, 393-417

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% and significant after 5 years. Compared to matching firms the under performance of IPO stocks is 13% after 5 years but insignificant.

Date: 2001
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