آیا سرمایه گذاران ADR شاکی هستند؟ شواهدی از بازارهای پیشرفته و در حال ظهور
|کد مقاله||سال انتشار||مقاله انگلیسی||ترجمه فارسی||تعداد کلمات|
|12998||2014||11 صفحه PDF||سفارش دهید||7896 کلمه|
Publisher : Elsevier - Science Direct (الزویر - ساینس دایرکت)
Journal : International Review of Economics & Finance, Volume 30, March 2014, Pages 138–148
This paper extends the research on investor herds to American Depository Receipts (ADRs). Using daily price data on 305 ADRs traded in US exchanges issued by corporations from 19 countries, we examine herding behavior in the market for ADRs within country and sector-based portfolios. There is significant evidence of herding behavior in the market for ADRs from Chile only regardless of alternative model specifications. On the other hand, we find a significant effect of the Asian crisis and the recent credit market crisis on herding behavior in ADR issues from Korea and the UK, respectively, suggesting a link between market crisis periods and herding behavior. Furthermore, we find no significant effects of currency rates (except Korea) or the performance of the market of origin on herding behavior among ADR issues. In the case of sector-based ADR portfolios, evidence of herding behavior exists in Basic Industries, Capital Goods, Food & Tobacco, and Textile & Trade, but only during periods of large market downturns. Overall, herding is more prevalent at the sector level than the country level for the markets for the ADRs.
Herding behavior in financial markets has attracted much attention over the past decade. The literature, in general, defines herding behavior as the tendency of investors to mimic the actions of other investors, moving in and out of particular securities, industries or markets in general as a group (Bikhchandani & Sharma, 2001). In the experimental economics literature, a number of earlier studies have established a link between speculative or irrational behavior of market participants and bubbles and crashes in financial markets (e.g. De Long et al., 1990, Froot and Obstfeld, 1991 and Hey and Morone, 2004, among others). Similarly, studies in the finance literature focus on pricing inefficiencies and argue that herding behavior can drive security prices away from equilibrium values supported by fundamentals and drive volatility in the market (e.g. Bikhchandani et al., 1992, Blasco et al., 2012 and Nofsinger and Sias, 1999). An increasing number of published works in the literature have tested the existence of investor's herding behavior in a number of domestic and global markets. In general, the literature provides market specific results with the strongest support for herding behavior in emerging stock markets. Interestingly, the analysis of herding behavior has not yet been extended to American Depository Receipts (ADRs). Therefore, the main goal of this paper is to extend the research on herding behavior to the market for ADRs. To our best knowledge, this is the initial study testing herding behavior in the market for foreign stocks traded in the US. Several studies including Christie and Huang (1995), Wermers (1999) and Chang, Cheng, and Khorana (2000) have examined herding behavior in the US market; however, these studies have only focused on securities issued by US firms for which information is easily accessible relative to those issued by foreign firms. Studying herding behavior in the market for ADRs is different from prior studies on herding that focus on securities traded in a single market and also interesting for several reasons. First, unlike domestic securities traded in the US, ADR returns are affected by not only the risk factors specific to the US market where the ADR is traded, but also potentially driven by additional uncertainties related to exchange rate movements as well as the developments in the home market where the ADR is based on. One can argue that compared to investors focusing on domestic securities only, investors in ADRs are exposed to a wider array of risk factors which may create additional uncertainty, thus potentially leading to a greater tendency to suppress their own beliefs and act as a herd, in particular during periods of market stress. Second, focusing on ADR returns allows us to examine if herding behavior is more prevalent among investors in ADR issues from particular countries, providing us with clues on what might be driving investors towards such behavior. Such an analysis could also provide valuable insight to fund managers focusing on country specific portfolios as evidence for herding in a particular market would suggest greater challenges for diversification due to correlated actions of market participants. Third, in addition to country-based ADRs, we also analyze ADRs within sector-based portfolios in order to investigate possible sector effects in this market segment. For example, ADR investors might be interested in foreign firms in particular industries, say telecommunication, regardless of the country of origin. This may be an important source of herding behavior as one would have a more homogeneous group of ADR investors not only facing similar uncertainties specific to those industries but also facing a significant disadvantage regarding access to information relative to domestic investors in the corresponding home markets. Finally, herding behavior among ADR investors may be influenced by a number of factors including the risk factors in the underlying stock market (in our case, the US market), as well as uncertainties in the home stock market and the currency market. It is therefore possible to test whether it is the market stress in the underlying market, in the country of origin or shocks in the currency market which drives such behavior among investors of that country's ADRs. Overall, this paper contributes to the literature by examining investors' herding behavior in the market for ADRs which, to our best knowledge, has not been studied in the literature. Using daily price data on 305 ADRs traded in US exchanges issued by corporations from 19 countries, we examine the cross-sectional ADR behavior with respect to movements in the US market index and test for possible herding behavior across country-based as well as sector-based ADR portfolios. In a recent study, Chiang and Zheng (2010) used daily sector returns from 18 advanced and emerging markets and found evidence of herding in some Asian and advanced markets (except for the US). Our study examines herding behavior from a different angle by focusing on the securities of foreign firms from a wide range of advanced and emerging markets. Our tests of country-based ADR portfolios indicate evidence of herding behavior in the ADRs from Chile, Korea and the UK. The robustness tests suggest that the results are robust to alternative model specifications and that shocks in the currency market and the market of origin have no significant impact on herding behavior in the ADR market. Overall, we find that herding behavior is more prevalent for ADRs from Chile and the UK whereas, we observe asymmetry in herding behavior in the case of Korea where such behavior occurs during periods of large market losses only. On the other hand, no significant evidence of herding behavior is found in other country-based ADR portfolios suggesting that the ADR market is largely efficient in pricing these securities. We also run similar tests after classifying ADRs into different sectors based on the North American Industry Classification System (NAICS) codes and test whether herding behavior exists within sector-based ADR groups. The tests suggest that herding is more prevalent at the sector level in the ADR market with herding behavior observed in Basic Industries, Capital Goods, Food & Tobacco, and Textile & Trade during periods of large market downturns only. The finding of herding behavior during large negative market shocks is consistent with several studies including Kahneman and Tversky (1979) and Kahneman, Knetsch, and Thaler (1990) which suggest that investors are more concerned with potential losses than gains, further suggesting asymmetries in utility functions or assessment of risk by investors. This paper is organized as follows. Section 2 provides a brief review of the literature on ADRs and tests of herding behavior. Section 3 provides the methodological details. Section 4 presents empirical results on country and sector based ADR portfolios. Finally, Section 5 concludes the paper.
نتیجه گیری انگلیسی
This paper extends the research on investor's herding behavior to the market for American Depository Receipts (ADR). We find evidence consistent with herding behavior in the emerging markets for ADRs from Chile and Korea only. Unlike Chiang and Zheng (2010) who focused on the stock markets of 18 advanced and emerging economies, we find no evidence of herd formation among investors of ADRs from developed nations including Australia, France, Germany, Ireland, Italy, Japan, Netherlands, and Switzerland. The only exception to this is the UK where herding behavior is heavily observed during the recent financial crisis period only. Similarly, unlike Tan et al. (2008) who documented evidence of herding behavior in the Chinese markets, we find no evidence supporting such behavior in the market for Chinese ADRs. Given these findings, we conclude that there is not much significant evidence of herding behavior at the country level in the market for ADRs. We also run similar tests after classifying ADRs into different sectors based on their NAICS codes and test whether herding behavior exists within sector-based ADR portfolios. Once again, we find evidence of herding behavior in Basic Industries, Capital Goods, Food & Tobacco, and Textile & Trade during periods of large market losses. The finding of herding behavior during large market downturns is consistent with a number of studies in the literature suggesting asymmetry in utility functions where investors are more concerned about potential gains than potential losses. Overall, the findings suggest that herding is more prevalent at the sector level rather than at the country level and this evidence is consistent with sector level evidence from emerging markets where herding behavior is documented (e.g. Demirer et al., 2010 and Lee et al., 2013). We suggest four avenues for future research. First, we have provided evidence from ADRs traded in the US only. It would be interesting to see whether similar results hold for firms that are cross listed in other major financial centers (i.e., London) or traded in different foreign currencies (i.e. the euro, the British pound, and the Japanese yen). Second, we have found that the performance of the market of origin and shocks in currency rates do not have any significant effect on the cross-sectional dispersion of ADR returns. Therefore, it is possible that ADR portfolios can be augmented by positions in the currency futures or in the home market index in order to enhance risk–return tradeoffs of ADR portfolios. Providing empirical evidence for potential diversification benefits is beyond the scope of this paper, but it could be considered in further studies. Third, potential reasons for differences in herding behavior among different sectors would be an interesting research agenda. Finally, this study has used a well-known herding test in the literature originally offered by Chang et al. (2000) and applied to a number of different markets. Although our additional tests suggest that the findings are robust to alternative specifications, the results may still be sensitive to using other alternative herding tests. Future studies need to apply alternative methods to see whether our findings hold well under different methodologies which test the existence of investor's herding behavior.