Time-varying risk premia in American depository receipt returns. (20th February 2007)

• Record Type: Journal Article
• Authors: Gregory, Richard P.
• Is Part Of: Global business & economics review. Volume 9:Number 1(2007)
• Page Start: 19
• Page End: 37
• Publication Date: 2007-02-20
• Subjects: American depository receipts -- ADRs -- international diversification -- market integration -- international asset pricing -- risk factors; Economics -- Periodicals; International economic relations -- Periodicals; 330.5
• Languages: English
• ISSNs: 1097-4954

Abstract

This paper examines the role of the world market, the home market, and exchange rate factors in the conditional pricing of a sample of 80 American Depository Receipts (ADRs) from 11 developed markets. Estimations based on a Multivariate GARCH in mean (MGARCH-M) model find that changes over time have led to the market for ADRs to become more integrated with the world market, though there is still substantial evidence of segmentation. The findings suggest that US investors in ADRs as a class are exposed to all three forms of risk. Some ADRs exhibit pricing of at least one risk factor and sometimes all three factors.