Return Linkages between Dual Listings Under Arbitrage Restrictions: A Study of Indian Stocks and Their London Global Depositary Receipts

Posted: 23 Jul 2003

See all articles by Palani-Rajan Kadapakkam

Palani-Rajan Kadapakkam

University of Texas at San Antonio - Department of Finance

Lalatendu Misra

University of Texas at San Antonio - Department of Finance

Abstract

We examine the linkages between returns on Indian Global Depositary Receipts (GDRs) in London and their underlying stocks in India. GDR returns are sensitive to returns observed earlier in India. This sensitivity is more pronounced for more liquid GDRs. Although arbitrage is not feasible for GDRs that sell at a premium, these GDRs are, nevertheless, sensitive to Indian returns. The sensitivity is greater for GDRs selling at a discount, where costly arbitrage is feasible. GDR returns have a significant but small effect on subsequent returns of the underlying stocks, with more liquid GDRs having a slightly greater impact.

Suggested Citation

Kadapakkam, Palani-Rajan and Misra, Lalatendu, Return Linkages between Dual Listings Under Arbitrage Restrictions: A Study of Indian Stocks and Their London Global Depositary Receipts. Available at SSRN: https://ssrn.com/abstract=421004

Palani-Rajan Kadapakkam

University of Texas at San Antonio - Department of Finance ( email )

San Antonio, TX 78249
United States

Lalatendu Misra (Contact Author)

University of Texas at San Antonio - Department of Finance ( email )

San Antonio, TX 78249-0633
United States
210-458-6315 (Phone)
210-458-6320 (Fax)

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