Advanced Search
MyIDEAS: Login to save this article or follow this journal

Why Do Price Spreads Between Domestic Shares And Their Adrs Vary Over Time?

Contents:

Author Info

  • Junming Hsu
  • Hsin-Yi Wang
Registered author(s):

    Abstract

    The exchange translated price spreads between domestic stocks and their American depositary receipts (ADRs) are conventionally ascribed to market friction. However, price spreads vary over time and sometimes fluctuate dramatically, which is hardly explainable by friction costs and implies the existence of arbitrage opportunities. This study hypothesizes that changes in trading volume and macro events generate heterogeneous expectations between two markets, which augments price spreads. Using a sample of 37 dual-listing firms of six Far Eastern countries, we confirm this hypothesis by showing that domestic volume and macro events shift price spreads. We also find that: (i) the liberalization of capital control in Korea and Taiwan slashed price spreads; and (ii) investors can profit by trading Hong Kong stocks and ADRs. Copyright 2008 The Authors. Journal compilation 2008 Blackwell Publishing Asia Pty Ltd

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
    File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/j.1468-0106.2008.00413.x
    File Function: link to full text
    Download Restriction: Access to full text is restricted to subscribers.

    As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

    Bibliographic Info

    Article provided by Wiley Blackwell in its journal Pacific Economic Review.

    Volume (Year): 13 (2008)
    Issue (Month): 4 (October)
    Pages: 473-491

    as in new window
    Handle: RePEc:bla:pacecr:v:13:y:2008:i:4:p:473-491

    Contact details of provider:
    Web page: http://www.blackwellpublishing.com/journal.asp?ref=1361-374X

    Order Information:
    Web: http://www.blackwellpublishing.com/subs.asp?ref=1361-374X

    Related research

    Keywords:

    References

    No references listed on IDEAS
    You can help add them by filling out this form.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as in new window

    Cited by:
    1. Dey, Malay K. & Wang, Chaoyan, 2012. "Return spread and liquidity: Evidence from Hong Kong ADRs," Research in International Business and Finance, Elsevier, vol. 26(2), pages 164-180.
    2. Weiju Young & Chun-An Li, 2011. "Price transmission between stocks of European countries and their American depositary receipts," Applied Financial Economics, Taylor & Francis Journals, vol. 21(11), pages 825-835.

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:bla:pacecr:v:13:y:2008:i:4:p:473-491. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing) or (Christopher F. Baum).

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.