portfolio in that month t. Thus, we obtain the time series of the calendar portfolio
monthly returns from May 1987 (the first IPO in our sample) to December 2003
{R
p05/87
… R
p12/03
}.
To measure and test the portfolio’s abnormal monthly mean return we apply the
Fama and French (1993) three-factor model to the time series of the portfolio’s
monthly returns. Then, we run the following time series regression:
R
pt
R
ft
α
p
β
1p
(R
Mt
R
ft
)
β
2p
HML
t
β
3p
SMB
t
ε
pt
t05/87, ... ,12/03,
(7.7)
where R
ft
is the 1-month Treasury bill (risk-free) rate of return, HML
t
is the difference
in returns ...
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