The dynamic relationship between the prices of ADRs and their underlying stocks: evidence from the threshold vector error correction model

Huimin Chung, Tsung-Wu Ho and Ling-Ju Wei

Applied Economics, 2005, vol. 37, issue 20, 2387-2394

Abstract: This paper sets out to estimate the dynamic relationship that exists between the prices of ADRs and their underlying stocks, in both the short run and the long run, using a number of recent developments of the threshold cointegration framework. The empirical results support the notion of nonlinear mean reversion of the prices of ADRs and their underlying stocks.

Date: 2005
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DOI: 10.1080/00036840500218729

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