Market timing wealth effects of American Depository Receipts: The cases of emerging and developed market issues

We examine the long-term returns of a sample of foreign equities traded on the New York Stock Exchange as American Depository Receipts (ADRs) issued between January 1, 1987 and September 30, 2000. Distinctions are made between those ADRs issued by companies headquartered in emerging and developed markets and those ADRs issued before and after January 1, 1998. The results suggest that, on average, emerging market ADRs issued prior to January 1, 1998 underperform the S&P 500 in long-term holding periods, while those issued after January 1, 1998 outperform the S&P 500. Alternatively, developed market ADRs slightly underperform the S&P 500 in long-term holding periods regardless of date of issue.