Decomposing and testing Long-run Returns with an application to initial public offerings in Denmark

Jan Jakobsen and Ole Sørensen
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Jan Jakobsen: Department of Finance, Copenhagen Business School, Postal: Department of Finance, Copenhagen Business School, Solbjerg Plads 3, A5, DK-2000 Frederiksberg, Denmark
Ole Sørensen: Department of Accounting and Auditing, Copenhagen Business School, Postal: Department of Accounting and Auditing,, Copenhagen Business School,, Solbjerg Plads 3, DK-2000 Frederiksberg

No 2000-2, Working Papers from Copenhagen Business School, Department of Finance

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.

Keywords: Market efficiency; initial public offerings; long-run returns; right skewed distributions; testing; volatility filtering. (search for similar items in EconPapers)
JEL-codes: G14 G32 (search for similar items in EconPapers)
Pages: 45 pages
Date: 1999-11-01
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Persistent link: https://EconPapers.repec.org/RePEc:hhs:cbsfin:2000_002

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