Return Commonality in Cross Listings: Evidence from Hong Kong ADRs
Journal of Index Investing, 2020
Posted: 12 Jun 2020
Date Written: May 16, 2020
In a return commonality framework, the authors estimate portfolio betas associated with changes in returns of 15 Chinese ADRs and their underlying H-shares, where the portfolios denote hosts (NYSE and SHSE) and home (Hang Seng) markets, and their returns are common determinants of ADRs and H-shares returns. In addition, the authors test whether returns on ADRs and H-shares portfolios determine their component ADRs and H-shares returns. Using a quantile regression methodology, the authors estimate those betas for four sample quartiles. The authors’ results indicate an asymmetric impact of changes in portfolio returns on changes in ADR and H-share returns; further, the asymmetries are enhanced across return quartiles. The authors interpret the market impact on ADR and H-share returns as denoting investor sentiments.
Keywords: ADR, H-Shares, Return Commonality
JEL Classification: G11, G15, G40
Suggested Citation: Suggested Citation