The purpose of this paper is to contrast market risk exposure and diversification of single-listed American depository receipts (“ADRs”) with those of dual-listed ADRs from the same geographical region during 2004-2012.
The study uses orthogonal returns in two-factor models to infer exposure to the US and ADRs’ home markets.
The authors found that both ADR types provide no diversification and are significantly exposed to US market risk. The authors also found that portfolios of both single- and dual-listed ADRs behave significantly differently than their home markets.
Only several academic papers discuss single-listed ADRs, and to the best of the knowledge, this study is the first to assess their diversification value.
The authors appreciate the comments of Don T. Johnson (the editor), and two anonymous referees. In addition, the authors appreciate the feedback of workshops participants at the 2015 Eastern Finance Meeting and University of Puerto Rico. The authors also thank Ricardo Marrero and José Davis-Pellot for excellent research assistance.
Rodriguez, J. and Romero, H. (2016), "Diversification and market risk exposure of single-listed versus dual-listed ADRs", Managerial Finance, Vol. 42 No. 11, pp. 1125-1135. https://doi.org/10.1108/MF-02-2016-0043Download as .RIS
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