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After-market performance of industrial American Depository Receipts: Does level of issue and market timing affect returns?

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  • Mark Schaub

    (Northwestern State University, College of Business)

Abstract

In this study, I examine New York Stock Exchange-listed American Depository Receipts (ADRs) from industrial firms to determine overall short- and long-term investment performance and whether the level of issue (emerging versus developed) or timing of issue (before or during the US bear market) affects ADR performance relative to the S&P 500. Early performance results suggest a slight underperformance by the industrial portfolio; however, emerging issues significantly underperform the market index while developed issues outperform the S&P 500 during the first month of trading. After three years of trading in the US markets, industrial ADRs return roughly the same as the S&P 500; however, emerging issues underperform developed issues and ADRs listed before 1/1/98 drastically underperform the market index while those listed after 1/1/98 substantially outperform the market. These results provide evidence that level of issue and timing of issue affect portfolio returns when investing in industrial ADRs.

Suggested Citation

  • Mark Schaub, 2007. "After-market performance of industrial American Depository Receipts: Does level of issue and market timing affect returns?," Journal of Asset Management, Palgrave Macmillan, vol. 8(4), pages 259-266, November.
    • Handle: RePEc:pal:assmgt:v:8:y:2007:i:4:d:10.1057_palgrave.jam.2250080
    DOI: 10.1057/palgrave.jam.2250080
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    References listed on IDEAS

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    1. Christine X. Jiang, 1998. "Diversification with American Depository Receipts: The Dynamics and the Pricing Factors," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 25(5&6), pages 683-699.
    2. Mark Schaub, 2005. "Wealth effects of American depository receipts listed on the New York Stock Exchange: The case of telecom firms," Journal of Asset Management, Palgrave Macmillan, vol. 6(4), pages 288-297, December.
    3. Foerster, Stephen R. & Karolyi, G. Andrew, 2000. "The Long-Run Performance of Global Equity Offerings," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 35(4), pages 499-528, December.
    4. Christine X. Jiang, 1998. "Diversification with American Depository Receipts: The Dynamics and the Pricing Factors," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 25(5‐6), pages 683-699, June.
    5. Choi, Yoon K. & Kim, Dong-soon, 2000. "Determinants of American Depositary Receipts and their underlying stock returns: Implications for international diversification," International Review of Financial Analysis, Elsevier, vol. 9(4), pages 351-368.
    6. Callaghan, Joseph H. & Kleiman, Robert T. & Sahu, Anandi P., 1999. "The market-adjusted investment performance of ADR IPOs and SEOs," Global Finance Journal, Elsevier, vol. 10(2), pages 123-145.
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