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

Author

Listed:
  • Jakobsen, Jan

    (Department of Finance, Copenhagen Business School)

  • Sørensen, Ole

    (Department of Accounting and Auditing, Copenhagen Business School)

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.

Suggested Citation

  • Jakobsen, Jan & Sørensen, Ole, 1999. "Decomposing and testing Long-run Returns with an application to initial public offerings in Denmark," Working Papers 2000-2, Copenhagen Business School, Department of Finance.
    • Handle: RePEc:hhs:cbsfin:2000_002
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    File URL: http://openarchive.cbs.dk/cbsweb/handle/10398/7192
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    References listed on IDEAS

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    More about this item

    Keywords

    Market efficiency; initial public offerings; long-run returns; right skewed distributions; testing; volatility filtering.;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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