Which sentiments do US investors follow when trading ADRs?

Yaseen S. Alhaj-Yaseen () and Dana Ladd ()
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Yaseen S. Alhaj-Yaseen: Middle Georgia State University
Dana Ladd: University of Findlay

Journal of Economics and Finance, 2019, vol. 43, issue 3, No 4, 506-527

Abstract: Abstract This study examines herding tendency in the market for American Depository Receipts (ADRs) by analyzing daily data from 343 ADRs listed on the US stock exchange. Using two different approaches, Christie & Huang (Financ Anal J 51(4), 31–37, 1995) and Chang et al. (J Bank Financ 24(10), 1651–1679, 2000) showed that US investors do not herd when trading domestic stocks. We extend these works by using the same approaches to investigate whether US investors herd when trading registered ADRs. Two types of herding are considered in our analysis: informational cascades and investigative herding. We find strong evidence that US investors follow the same signals when trading ADRs rather than following others’ trades. Specifically, they have a tendency to herd around the ADRs’ home market indexes. These results suggest that such herding is based on value-relevant information, which is consistent with the presence of investigative herding.

Keywords: American depositary receipts; Herding behavior; Information asymmetry (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (1)

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DOI: 10.1007/s12197-018-9452-z

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