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Risk-Return Dynamics of Cross-listed Stocks

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  • Ming Jing Yang

Abstract

Since US has been playing a leading role in global economy and technology, any major price changes in the American stock market may affect other stock markets worldwide. The American Depositary Receipts (ADRs), being the substitutes for the foreign securities, provide American investors with appealing investment opportunities to form international portfolios and to achieve the international diversification benefits. These stocks cross-listed on different exchanges not only assist corporations in raising capital abroad, but also provide a better channel for firms to search for price efficiency across the international capital markets. Consequently, the objective of this study is to examine the risk and return dynamics between ADRs and their underlying securities. The empirical results of this study indicate that the mean and volatility spillover effects and information transmission between ADRs and their underlying securities are bi-directional for the Taiwanese securities, but uni-directional (from the underlying securities to their ADRs) for the Chinese securities. Furthermore, while the international center hypothesis and the home bias hypothesis are both supported for the Taiwanese securities cross-listed in US stock markets, this study also provides evidence more in favor of the home bias hypothesis for the Chinese ADRs and their underlying securities.

Suggested Citation

  • Ming Jing Yang, 2017. "Risk-Return Dynamics of Cross-listed Stocks," Accounting and Finance Research, Sciedu Press, vol. 6(4), pages 294-294, Novebmer.
    • Handle: RePEc:jfr:afr111:v:6:y:2017:i:4:p:294
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    References listed on IDEAS

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    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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