Regime-switching analysis of ADR home market pass-through |
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| Authors: | Hui He Jiawen Yang |
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| Affiliation: | a College of Business, James Madison University, MSC 0203, Harrisonburg, VA 22807, United States
b School of Business, The George Washington University, Funger Hall, Suite 401, Washington, DC 20052, United States |
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| Abstract: | We model and estimate ADRs’ home market pass-through and pricing-to-market using a regime-switching approach, which nests the two regimes in a conditional capital asset pricing model and treats any changes in these two regimes probabilistically. Our results from the 1998 to 2006 data show that the pricing-to-market regime dominates ADRs from China and Japan, whereas the home market pass-through regime dominates ADRs from Argentina and Germany when their respective home markets are volatile. |
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| Keywords: | F21 F30 G15 |
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