RT Journal Article
SR Electronic
T1 Why Not Diversify into Emerging Equity Markets via ADRs?
JF The Journal of Investing
FD Institutional Investor Journals
SP 18
OP 27
DO 10.3905/joi.2016.25.2.018
VO 25
IS 2
A1 Tian Yuan
A1 Rakesh Gupta
A1 Eduardo Roca
YR 2016
UL https://pm-research.com/content/25/2/18.abstract
AB American depositary receipts (ADRs) are typically issued by a U.S. depository bank to represent shares in non-U.S. companies. This article seeks to identify whether investing in ADR market indexes provides greater diversification benefits for U.S. investors compared with those gained from investing in foreign stock market indexes. Using data from the world’s four largest emerging markets—Brazil, Russia, India, and China (BRIC), the authors find that diversification benefits tend to vary with time and investors diversifying into the ADR market can enjoy higher rewards for the level of risk. The incremental wealth may be attributed to the default security analysis, resulting in a nonmarket premium for investors.TOPICS: Security analysis and valuation, equity portfolio management, emerging