Working Papers,
Copenhagen Business School, Department of Finance

Abstract: This paper investigates long-run returns by utilizing log-normal distribution properties

of cross-sectional buy-and-hold returns. We decompose expected cross-sectional buy-and-

hold returns into transformed mean components and volatility components. This

decomposition shows that the volatility component contributes positively to the right-skewed

buy-and-hold returns due to Jensen's inequality. Given the log-normal distri-bution

properties are fulfilled, the method can be applied to any type of long-horizon

event study of security performance. We apply the method to IPO stocks and SEO

stocks listed on the Copenhagen Stock Exchange. Using traditional standard tech-niques,

we find that IPO stocks and SEO stocks under perform relative to the market

after five years by 27.3 percent and 21.4 percent, respectively. However, the volatility-adjusted

performance measure shows that the IPO stocks and SEO stocks under per-form

relative to the market after five years by 43.7 percent and 38.1 percent, respec-tively.

Keywords: Wealth relatives; buy-and-hold returns; equity offerings

JEL-codes: G14; G32

38 pages, December 1, 1999

Full text files

7177  

Download statistics

• Copenhagen Business School, Department of Finance
• Ordering Working Papers
• Home page for this series

Questions (including download problems) about the papers in this series should be directed to Lars Nondal (ln.lib@cbs.dk)
Report other problems with accessing this service to Sune Karlsson (sune.karlsson@oru.se).

RePEc:hhs:cbsfin:2000_003This page generated on 2024-09-13 22:14:14.