Are Adrs Different from Us Stocks? An Analysis of Idiosyncratic Risks

29 Pages Posted: 22 Oct 2006

See all articles by Luis-Felipe Palacios

Luis-Felipe Palacios

University of Pennsylvania, WRDS

Robert J. Boldin

Indiana University of Pennsylvania - Department of Finance and Legal Studies

Mukesh K. Chaudhry

Indiana University of Pennsylvania - Department of Finance and Legal Studies

Date Written: October 2006

Abstract

Determinants of ADR's idiosyncratic risk are examined from the perspective of undiversified investors. Since ADRs enjoy a unique status, vis-à-vis US companies, we study whether determinants of their risk, derived from a two-stage regression model, are different from the one for U.S. firms. For the time period from 1999 through mid 2005, we found that, with the exception of the smallest US stocks in the sample, ADR's idiosyncratic risks are analogous to the ones observed for US firms. Also, ADR's sensitivity to fundamental variables that represent their inner financial structure is similar to US firms.

Keywords: ADRs, Idiosyncratic Risk, International Finance, Cross-Listed Stocks

JEL Classification: G11, G15

Suggested Citation

Palacios, Luis-Felipe and Boldin, Robert J. and Chaudhry, Mukesh K., Are Adrs Different from Us Stocks? An Analysis of Idiosyncratic Risks (October 2006). Available at SSRN: https://ssrn.com/abstract=938993 or http://dx.doi.org/10.2139/ssrn.938993

Luis-Felipe Palacios (Contact Author)

University of Pennsylvania, WRDS ( email )

Philadelphia, PA 19104
United States

Robert J. Boldin

Indiana University of Pennsylvania - Department of Finance and Legal Studies ( email )

Indiana, PA
United States

Mukesh K. Chaudhry

Indiana University of Pennsylvania - Department of Finance and Legal Studies ( email )

Indiana, PA
United States

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