 Transmission of pricing information between level III ADRs and their underlying domestic stocks: Empirical evidence from IndiaKaushik Bhattacharjee, Nupur Pavan Bang and Sravya Mamidanna Journal of Multinational Financial Management, 2014, vol. 24, issue C, 43-59 Abstract: This paper studies the price interdependence and transmission pattern between a group of level III American Depository Receipts (ADRs) and their respective underlying stock prices in India. We investigate the transmission dynamics of pricing information between the ADRs and their underlying stocks. Using a Vector Error Correction Model (VECM) with error correction terms, we find bidirectional transmission of price information flow between the ADRs and their underlying stocks. Our results provide evidence of bidirectional causality between the National Stock Exchange and the NASDAQ/New York Stock Exchange. We find that the ADRs tend to overreact to their own lagged price changes and tend to underreact to the lagged price changes in the underlying domestic stocks. Keywords: ADRs; Information transmission; Co-integration; Market-efficiency (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:mulfin:v:24:y:2014:i:c:p:43-59 DOI: 10.1016/j.mulfin.2013.12.001 Access Statistics for this article Journal of Multinational Financial Management is currently edited by I. Mathur and G. G. Booth More articles in Journal of Multinational Financial Management from Elsevier |
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