Decomposing and testing Long-run Returns with an application to initial public offerings in Denmark
نویسندگان
چکیده
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 crosssectional 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.
منابع مشابه
Long run underperformance of initial public offerings: an explanation;
Initial public offerings, even though risky, typically underperform the indices for the first few years after offering. This can be explained by high divergence of opinion raising the initial market price, and by this divergence of opinion declining over time. With time, the valuation of the price setting marginal investor comes closer to the average investor’s valuation. This theory also expla...
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