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ADR characteristics and performance in international and global indexes

Author

Listed:
  • Arindam Bandopadhyaya
  • Lal C Chugh
  • James L Grant

    (University of Massachusetts)

Abstract

This study examines the characteristics and performance of American depository receipts (ADRs) in international indexes and the role of ADRs on foreign ordinaries as a global diversifier. We find that ADRs in Europe, Australasia and the Far East are tilted toward three common factors: giant cap, dividend yield and UK stocks. We also find that portfolio combinations of ADRs and US equities provide inefficient diversification opportunities relative to an efficient frontier analysis of the S&P500 and Global 700, the latter portfolio consisting of a diversified mix of ADRs and non-ADR-based foreign shares. Our findings on ADR characteristics are consistent with prior research, whereas our ADR performance findings are inconsistent with prior research. Caveats apply, notably for yield-seeking taxable accounts.

Suggested Citation

  • Arindam Bandopadhyaya & Lal C Chugh & James L Grant, 2009. "ADR characteristics and performance in international and global indexes," Journal of Asset Management, Palgrave Macmillan, vol. 10(1), pages 9-21, April.
    • Handle: RePEc:pal:assmgt:v:10:y:2009:i:1:d:10.1057_jam.2008.38
    DOI: 10.1057/jam.2008.38
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    References listed on IDEAS

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    1. De Santis, Giorgio & Gerard, Bruno, 1997. "International Asset Pricing and Portfolio Diversification with Time-Varying Risk," Journal of Finance, American Finance Association, vol. 52(5), pages 1881-1912, December.
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    6. Aggarwal, Reena & Dahiya, Sandeep & Klapper, Leora, 2007. "ADR holdings of US-based emerging market funds," Journal of Banking & Finance, Elsevier, vol. 31(6), pages 1649-1667, June.
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    Cited by:

    1. Gupta, Rakesh & Yuan, Tian & Roca, Eduardo, 2016. "Linkages between the ADR market and home country macroeconomic fundamentals: Evidence in the context of the BRICs," International Review of Financial Analysis, Elsevier, vol. 45(C), pages 230-239.
    2. James L Grant, 2009. "A perspective on US regime change and the global financial crisis," Journal of Asset Management, Palgrave Macmillan, vol. 10(4), pages 205-209, October.

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