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Decomposing and Testing Long‐term Returns: an Application on Danish IPOs

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  • Jan Bo Jakobsen
  • Ole Sørensen

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.

Suggested Citation

  • Jan Bo Jakobsen & Ole Sørensen, 2001. "Decomposing and Testing Long‐term Returns: an Application on Danish IPOs," European Financial Management, European Financial Management Association, vol. 7(3), pages 393-417, September.
  • Handle: RePEc:bla:eufman:v:7:y:2001:i:3:p:393-417
    DOI: 10.1111/1468-036X.00162
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    Cited by:

    1. Nugroho Sasikirono & Sumiati Sumiati & Nur Khusniyah Indrawati, 2018. "Underpricing and long-term market performance of initial public offerings in Indonesia: A quantile regression approach," Business and Economic Horizons (BEH), Prague Development Center, vol. 14(1), pages 152-167, January.

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