European Business Schools Librarian's Group
Working Papers,
Copenhagen Business School, Department of Finance
No 2000-2: Decomposing and testing Long-run Returns with an application to initial public offerings in Denmark
Jan Jakobsen and Ole Sørensen
Additional contact information
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
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.
45 pages, November 1, 1999
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