ADRs are negotiable certificates,which represent the ownership of foreign corporations and are traded in the U.S stock market. As a potential alternative to direct investment in foreign stocks,ADRs have become popular tools for international diversification. In our paper,we focus on the price transmission mechanism amongst the ADR and it¡¦s pricing factors as well as the global diversification effect of ADRs. Specifically,three topics are examined in our paper¡R
First we apply several multiple regression models to identify what factors affect ADR returns and the returns on underlying stocks. These factors we used to incorporated included foreign exchange rate, S&P 500 Index and world Index. Due to possible common factors not incorporated in our models, we apply SUR to yield more robust results.
Second, we apply VAR to investigate how ADR returns and returns on underlying stocks interrelated and augmented by lagged U.S. equity index and world index on a daily basis.
Finally, we apply vector-error-correction model to investigate how ADR returns and returns on underlying stocks interrelated with deviations from long run relationships. We first implement Augmented Dickey-Fuller tests to see if they are integrated of the same order. The residuals are then used as error-correcting terms for VECM. Due to the fact that these markets do not close synchronously, VECM with different error correcting terms documented in this study does provide important information regarding how ADR or stock returns react to the deviations from the long-run equilibrium.
| Identifer | oai:union.ndltd.org:NSYSU/oai:NSYSU:etd-0905106-152227 |
| Date | 05 September 2006 |
| Creators | chen, Chih-ling |
| Contributors | An-Ling Chen, Alan T. Wang, Chi-Jeng Wang, Yi-Kai Chen |
| Publisher | NSYSU |
| Source Sets | NSYSU Electronic Thesis and Dissertation Archive |
| Language | English |
| Detected Language | English |
| Type | text |
| Format | application/pdf |
| Source | http://etd.lib.nsysu.edu.tw/ETD-db/ETD-search/view_etd?URN=etd-0905106-152227 |
| Rights | restricted, Copyright information available at source archive |
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