Macroeconomic Drivers of Chinese ADRs: Home Country vs. US Effects

Richard Burdekin and Junjie Zhang

Chinese Economy, 2019, vol. 52, issue 4, 342-357

Abstract: The potential connections between macroeconomic variables and the stock market becomes less straightforward for shares issued in one country but traded in another. Whereas past work has suggested that cross-listed stocks respond to country-specific sentiment factors in the location of trade, in this article we show how Chinese ADRs also generally respond more to U.S. macroeconomic developments than to home-country influences. Following the application of Markov-switching analysis, we find that Chinese macroeconomic effects become relatively more important during times of crisis, however. Particularly large responses to Chinese macroeconomic variables are seen in the case of a Chinese closed-end fund that trades in the United States, but invests directly in Shanghai A-shares.

Date: 2019
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DOI: 10.1080/10971475.2018.1559127

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