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The impact of American depositary receipts on the Japanese index: Do industry effect and size effect matter?

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  • Chen, Mei-ping
  • Lee, Chien-Chiang
  • Hsu, Yi-Chung

Abstract

This paper explores whether American Depositary Receipts (ADRs) affect the underlying local index (LD) for Japanese market, and such a phenomenon is considered as an adverse influence. Nonlinear Granger causality and Bayesian factor analysis are employed to investigate the nonlinear relationship between ADR and LD. The results indicate the existence of a nonlinear relationship between ADR and LD by employing Bayesian factor analysis, which has never been employed in the related issues. Next, the linear Granger causality findings reveal that the ADRs, which influence Japanese index, are not affected by industry effect rather than by size effects. Overall, most relationships between ADR and LD are nonlinear while the specific turning points of different firms influence LD. Ultimately, we also provide the related policy and economic implications.

Suggested Citation

  • Chen, Mei-ping & Lee, Chien-Chiang & Hsu, Yi-Chung, 2011. "The impact of American depositary receipts on the Japanese index: Do industry effect and size effect matter?," Economic Modelling, Elsevier, vol. 28(1-2), pages 526-539, January.
    • Handle: RePEc:eee:ecmode:v:28:y:2011:i:1-2:p:526-539
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    3. Lee, Chien-Chiang & Chang, Chi-Hung & Chen, Mei-Ping, 2015. "Industry co-movements of American depository receipts: Evidences from the copula approaches," Economic Modelling, Elsevier, vol. 46(C), pages 301-314.

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    More about this item

    Keywords

    American Depositary Receipts Bayesian factor analysis Japan Nonlinear Granger causality;

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General

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