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American depositary receipts: Asia-Pacific evidence on convergence and dynamics

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  • Chen, Haiqiang
  • Choi, "Paul" Moon Sub
  • Kim, Hyunseob
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    Abstract

    This study explores the convergence between the prices of American Depositary Receipts (ADRs) listed by Asia-Pacific firms and their original shares listed on home exchanges. Instead of relying on conventional parametric approaches that carry embedded model-specification errors, we contribute to the literature by introducing a nonparametric technique to estimate the convergence speed parameter. We present the time-varying characteristics of both firm and country-level convergence speed parameters. Furthermore, we empirically verify and visually corroborate the comparative dynamics of convergence with respect to short sales restrictions, trading time differences, and market-tier measures proxied by the Morgan Stanley Capital International indices. We conclude that enhancement in market efficiency accelerates the reversion to the parity of ADR-pairs.

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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Multinational Financial Management.

    Volume (Year): 18 (2008)
    Issue (Month): 4 (October)
    Pages: 346-368

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    Handle: RePEc:eee:mulfin:v:18:y:2008:i:4:p:346-368

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    Web page: http://www.elsevier.com/locate/mulfin

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    Cited by:
    1. Chen, Haiqiang & Choi, Paul Moon Sub, 2012. "Does information vault Niagara Falls? Cross-listed trading in New York and Toronto," Journal of Empirical Finance, Elsevier, vol. 19(2), pages 175-199.
    2. repec:wyi:journl:002166 is not listed on IDEAS
    3. repec:wyi:journl:002160 is not listed on IDEAS

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