Macroeconomic Drivers of Chinese ADRs: Home Country vs. US Effects

29 Pages Posted: 28 Nov 2018

See all articles by Richard C. K. Burdekin

Richard C. K. Burdekin

Claremont McKenna College - Robert Day School of Economics and Finance

Junjie Zhang

Claremont Colleges - School of Politics and Economics

Date Written: November 12, 2018

Abstract

The potential connections between macroeconomic variables and the stock market becomes less straightforward for shares issued in one country but traded in another. Whereas past work has suggested that cross-listed stocks respond to country-specific sentiment factors in the location of trade, in this paper we show how Chinese ADRs also generally respond more to US macroeconomic developments than to home-country influences. Following the application of Markov-switching analysis, we find that Chinese macroeconomic effects become relatively more important during times of crisis, however. Particularly large responses to Chinese macroeconomic variables are seen in the case of a Chinese closed-end fund that trades in the United States, but invests directly in Shanghai A-shares.

Keywords: ADRs; China; closed-end funds; macroeconomic factors; investor sentiment

JEL Classification: G15

Suggested Citation

Burdekin, Richard C. K. and Zhang, Junjie, Macroeconomic Drivers of Chinese ADRs: Home Country vs. US Effects (November 12, 2018). Claremont McKenna College Robert Day School of Economics and Finance Research Paper No. 3283363. Available at SSRN: https://ssrn.com/abstract=3283363

Richard C. K. Burdekin (Contact Author)

Claremont McKenna College - Robert Day School of Economics and Finance ( email )

500 E. Ninth Street
Claremont, CA 91711
United States

Junjie Zhang

Claremont Colleges - School of Politics and Economics ( email )

Claremont, CA 91711
United States

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