ADR characteristics and performance in international and global indexes

Arindam Bandopadhyaya, Lal C Chugh and James L Grant ()
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James L Grant: University of Massachusetts

Journal of Asset Management, 2009, vol. 10, issue 1, No 2, 9-21

Abstract: Abstract This study examines the characteristics and performance of American depository receipts (ADRs) in international indexes and the role of ADRs on foreign ordinaries as a global diversifier. We find that ADRs in Europe, Australasia and the Far East are tilted toward three common factors: giant cap, dividend yield and UK stocks. We also find that portfolio combinations of ADRs and US equities provide inefficient diversification opportunities relative to an efficient frontier analysis of the S&P500 and Global 700, the latter portfolio consisting of a diversified mix of ADRs and non-ADR-based foreign shares. Our findings on ADR characteristics are consistent with prior research, whereas our ADR performance findings are inconsistent with prior research. Caveats apply, notably for yield-seeking taxable accounts.

Keywords: ADR; global (and international) indexes; characteristics; performance; efficient frontier (search for similar items in EconPapers)
Date: 2009
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DOI: 10.1057/jam.2008.38

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