The impact of American depositary receipts on the Japanese index: Do industry effect and size effect matter?

Mei-Ping Chen (), Chien-Chiang Lee () and Yi-Chung Hsu

Economic Modelling, 2011, vol. 28, issue 1, 526-539

Abstract: This paper explores whether American Depositary Receipts (ADRs) affect the underlying local index (LD) for Japanese market, and such a phenomenon is considered as an adverse influence. Nonlinear Granger causality and Bayesian factor analysis are employed to investigate the nonlinear relationship between ADR and LD. The results indicate the existence of a nonlinear relationship between ADR and LD by employing Bayesian factor analysis, which has never been employed in the related issues. Next, the linear Granger causality findings reveal that the ADRs, which influence Japanese index, are not affected by industry effect rather than by size effects. Overall, most relationships between ADR and LD are nonlinear while the specific turning points of different firms influence LD. Ultimately, we also provide the related policy and economic implications.

Keywords: American Depositary Receipts; Bayesian factor analysis; Japan; Nonlinear; Granger causality (search for similar items in EconPapers)
JEL-codes: C14 C22 G15 (search for similar items in EconPapers)
Date: 2011
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:28:y:2011:i:1:p:526-539

DOI: 10.1016/j.econmod.2010.07.001

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