Risk-Adjusted Returns of American Depositary Receipts on Chinese and Indian Stocks

Authors

  • Onur Arugaslan Western Michigan University, United States
  • Ajay Samant Western Michigan University, United States

DOI:

https://doi.org/10.32890/ijbf2009.6.2.4

Keywords:

ADRs, Portfolio choice, Investment decisions, Emerging markets

Abstract

This study evaluates the risk-adjusted performance of American Depositary Receipts (ADRs) on shares of stock of Chinese and Indian fi rms. The first part of the study examines the nature of Chinese and Indian ADRs (based on depositary bank, sponsorship status, industry classification and listing). The second part of the study evaluates the performance of these ADRs using statistical measures grounded in modern portfolio theory. Returns are adjusted for the degree of total risk and systematic risk inherent in each ADR, and the securities are then ranked on the basis of risk-adjusted performance. Two relatively new evaluation metrics, the Modigliani and Sortino measures, are used. The objective of the study is to provide documentation to global investors who are contemplating participation in Chinese and Indian stock markets via depositary receipts.

 

References

http://ijbf.uum.edu.my Aggarwal, R., Dahiya, S., and Klapper, L. F. (2005). American Depositary Receipts (ADR) Holdings of U.S. based emerging market funds. World Bank Policy Research (Working Paper No. 3538).

Alexander, G. J., Cheol S. E., and Janakiramanan S. (1987). Asset pricing and dual listing on foreign capital markets: A note. Journal of Finance, 42, 151-158.

Alexander, G. J., Cheol, S. E., and Janakiramanan S. (1988). International listings and stock returns: Some empirical evidence. Journal of Financial and Quantitative Analysis, 23, 135-151.

Chang, E. C., and Lewellen, W. G. (1984). Market timing and mutual fund investment performance. Journal of Business, 57(1), 57-72.

Eichler, S., and Maltritz, D. (2008). Currency crisis prediction using ADR market data - An options-based approach. EFA 2008 Athens Meetings Paper.

Henrikkson, R.D., and Merton, R.C. (1981). On market timing and investment performance II: Statistical procedures for evaluating forecasting skills. Journal of Business, 54(4), 513-533.

Jaiswal-Dale, Ameeta and Jithendranathan, Thadavillil, (2001). Fluctuating returns of dual listings: Domestic and ADR markets. EFMA 2001 Lugano Meetings Paper.

Jayaraman, N., Shastri K., and Tandon K., (1993). The impact of international cross-listings on risk and return: The evidence from American Depositary Receipts. Journal of Banking and Finance, 17(1), 91-103.

Jensen, M.C. (1968). The performance of mutual funds in the period 1945-64. Journal of Finance, 23(2), 389-416.

Kon, S. J., and Jen, F. C. (1979). The investment performance of mutual funds: An empirical investigation of timing, selectivity, and market efficiency. Journal of Business, 52(2), 263-289.

Modigliani, F., and Modigliani, L. (1997). Risk-adjusted performance. Journal of Portfolio Management, 23(2), 45-54.

Officer, D., and J. Ronald H. (1987). ADRs: A substitute for the real thing? Journal of Portfolio Management, 61-65.

Pedersen, C.S., and Satchell, S.E., (2002). On the foundation of performance measures under asymmetric returns. Quantitative Finance, 2(3), 217-223.

Umutlu, Mehmet, Salih, Aslihan A., and Akdeniz, L. (2007). Do ADR listings affect the dynamics of volatility in emerging markets? SSRN Working Paper.

Saudagaran, Shahrokh M. (1988). An investigation of selected factors influencing the decision to list on foreign stock exchanges. Journal of International Business Studies, 101-128.

Sharpe, W. F. (1966). Mutual fund performance. Journal of Business, 39(1), 119-138.

Solnik, B.H., and McLeavey, D., (2004). International investments (5th ed.). http://ijbf.uum.edu.my Reading, MA: Addison-Wesley.

Sortino, F. A., and Price, L. N. (1994, Fall). Performance measurement in a downside risk framework. Journal of Investing, 59-65.

Treynor, J.L. (1965). How to rate management of investment funds. Harvard Business Review, 43(1), 63-75. http://ijbf.uum.edu.my

Downloads

Published

20-08-2009

Issue

Vol. 6 No. 2 (2009): International Journal of Banking and Finance (IJBF) Vol. 6, No.2, 2009

Section

Articles

How to Cite

Arugaslan, O., & Samant, A. (2009). Risk-Adjusted Returns of American Depositary Receipts on Chinese and Indian Stocks. International Journal of Banking and Finance, 6(2), 77-93. https://doi.org/10.32890/ijbf2009.6.2.4

Research impact

Harvested 2026-09-07
0 citations recorded so far

Counts differ between services because each indexes a different body of literature. None of them is the whole picture.

Identifiers DOI 10.32890/ijbf2009.6.2.4 OpenAlex W2993129786