The purpose of this paper is to examine how Korean firm American Depository Receipts (ADRs) performed vs a US index and an Asia Pacific regional index. ADRs have been known to help cause-emerging economies become more developed and foreign exchange markets become more stable.
The study utilizes standard ADR/IPO excess return methodology and presents returns on a month-by-month and cumulative basis for a three-year holding period beginning with the day of listing. Excess holding period returns are also provided.
The Korean firm ADRs trading on the NASDAQ underperformed both the US index and the regional Asia Pacific index for the first three years of trading. However, the Korean ADRs listed on the NYSE outperformed both the US index and the Asia Pacific index for the three-year holding period.
This paper shows how including equities of Korean firms traded in US markets in a stock portfolio helps to provide international diversification benefits. Solid performance vs market indexes may make subsequent and new issues from Korea more attractive in US equity markets.
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