تجزیه و تحلیل تغییر رژیم از مسیر بازار خانه ADR

We model and estimate ADRs’ home market pass-through and pricing-to-market using a regime-switching approach, which nests the two regimes in a conditional capital asset pricing model and treats any changes in these two regimes probabilistically. Our results from the 1998 to 2006 data show that the pricing-to-market regime dominates ADRs from China and Japan, whereas the home market pass-through regime dominates ADRs from Argentina and Germany when their respective home markets are volatile.

Foreign firms typically list their stocks on US stock exchanges in the form of American Depository Receipts (ADRs), which are issued by a US depository bank and signify ownership of shares in a non-US corporation. Investors holding ADRs receive dividends, and indirectly pay fees to the depository bank. While extensive research has been done in the past two decades rationalizing why foreign firms list their stocks on US stock exchanges in the form of ADRs, we still lack adequate knowledge of the pricing behavior of these cross-listed shares.1 This research addresses this issue, particularly the following questions: What determines the price movements of exchange-listed ADRs? Do they move with their respective home markets, or with the US market?

In this paper, we investigate whether ADR index returns reflect their respective home market conditions (home market pass-through) or the US market (pricing-to-market). We use a regime-switching model to specify these two regimes and find different degrees of home market pass-through of ADRs in the four countries studied. China and Japan’s ADR index returns have a pricing-to-market dominance (low, home market pass-through regime probability). In Argentina and Germany, the home market pass-through regime dominates until 2003; then the pricing-to-market regime dominates from 2003 to 2006. We compare the regime-switching models with different versions of single-regime, conditional CAPMs in the out-of-sample forecast and find the regime-switching model with the US and home market factors outperforms the single-regime counterpart for China, Germany, and Japan. We also check to see whether replacing the US market factor with the world market factor improves the model forecast. The alternative regime-switching model produces similar estimates.