Stock prices and the location of trade: Evidence from China-backed ADRs |
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| Institution: | 1. Department of Statistics, College of Business, National Taipei University, Taiwan, ROC;2. Department of Finance, National Taiwan University, Taiwan, ROC;3. College of Management, Yuan Ze University, Taiwan, ROC |
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| Abstract: | This study examines whether the trading location affects equity returns of China-backed American Depository Receipts (ADRs) traded in the US. If International Financial Markets are integrated, stock prices should be affected only by their fundamentals; otherwise, stock prices may also be affected by their trading locations/investor sentiment. We find that China ADRs’ returns are affected more by the US market fluctuations than by Chinese market returns. We interpret the results as suggesting that International Financial Markets are at least partially segmented and country-specific investor sentiment affects stock prices. |
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| Keywords: | Location of trade Investor sentiment Financial market China ADRs |
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