Decomposing and Testing Long‐term Returns: an Application on Danish IPOs |
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| Authors: | Jan Bo Jakobsen,& Ole Sø rensen |
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| Affiliation: | Nordea Investment Management, Strandgade 3, DK‐1401 Copenhagen K, Denmark. e‐mail:;, Department of Accounting and Auditing, Copenhagen Business School, Solbjerg Plads 3, DK‐2000 Frederiksberg, Denmark. e‐mail: |
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| 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. |
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| Keywords: | initial public offerings long‐run returns right skewed distributions |
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