Are Adrs Different from Us Stocks? An Analysis of Idiosyncratic Risks
29 Pages Posted: 22 Oct 2006
Date Written: October 2006
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: Suggested Citation