Return Commonality in Cross Listings: Evidence from Hong Kong ADRs

Journal of Index Investing, 2020

Posted: 12 Jun 2020

See all articles by Malay K. Dey

Malay K. Dey

Cornell University; Quinnipiac University - Lender School of Business

Date Written: May 16, 2020

Abstract

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

Dey, Malay K., Return Commonality in Cross Listings: Evidence from Hong Kong ADRs (May 16, 2020). Journal of Index Investing, 2020, Available at SSRN: https://ssrn.com/abstract=3602897

Malay K. Dey (Contact Author)

Cornell University ( email )

United States

Quinnipiac University - Lender School of Business ( email )

United States

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