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The impact of listing Latin American ADRs on the risks and returns of the underlying shares
Authors:Terrence F Martell  Luis RodriguezJr  Gwendolyn P Webb
Institution:a Department of Economics and Finance, Box E-0621, Baruch College/The City University of New York, 17 Lexington Avenue, New York, NY, 10010, USA
Abstract:This paper examines the risks and returns of Latin American stocks following American depository receipt (ADR) listings in U.S. equity markets and finds no systematic change in their volatility. This finding differs from previous results for ADR introduction on European and Asian stocks, although it is consistent with several prior findings on international stock listings. Importantly, it supports the predictions of Domowitz, Glen, and Madhavan's 1998 model of international cross-listings. This model predicts that the effects of such listings will differ across stocks because the net effect is indicative of the specific trade-off for each individual stock between benefits of enhanced intermarket competition and costs stemming from the diversion of information-linked orders out of the domestic market.
Keywords:International listings  Secondary listings  American depository receipts  Emerging markets  Stock volatility
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