A New Approach for Interpreting Long-Run Returns, Applied to IPO and SEO Stocks

Jan Jakobsen and Torben Voetmann
Additional contact information
Jan Jakobsen: Nordea Investment Management Strandgade

Annals of Economics and Finance, 2005, vol. 6, issue 2, 337-363

Abstract: In this paper, we introduce a new approach for interpreting long-run returns; which we then test on IPOs and SEOs in Denmark. We demonstrate that by decomposing the mean and volatility components of the expected crosssectional buy-and-hold returns, we can improve the interpretation of long-run returns. Using a traditional method, we found that after five years the buy-and-hold returns of IPO and SEO stocks underperformed the market by 27.3 percent and 21.4 percent, respectively. By applying the new approach we found that after five years the same stocks underperformed by 43.7 percent and 38.1 percent. Although underperformance has long been documented in the empirical literature, we found that the underperformance is larger than previously documented.

Keywords: Wealth relatives; Buy-and-hold returns; Right skewed distributions (search for similar items in EconPapers)
JEL-codes: G14 G32 (search for similar items in EconPapers)
Date: 2005
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://aeconf.com/Articles/Nov2005/aef060209.pdf (application/pdf)
http://down.aefweb.net/AefArticles/aef060209.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cuf:journl:y:2005:v:6:i:2:p:337-363

Access Statistics for this article

Annals of Economics and Finance is currently edited by Heng-fu Zou

More articles in Annals of Economics and Finance from Society for AEF Contact information at EDIRC.
Bibliographic data for series maintained by Qiang Gao ().