Title: ADRs price discovery and transmission effect to domestic market: evidence from Indian ADRs
Authors: Aditya Keshari; Amit Gautam
Addresses: Institute of Management Studies, Banaras Hindu University, Lanka, Varanasi, U.P. (221005), India ' Institute of Management Studies, Banaras Hindu University, Lanka, Varanasi, U.P. (221005), India
Abstract: The price discovery of Indian ADRs is being provided for the sample period 2010-2022, using the SUR and FE-LSDV models, which incorporate contemporary factors as well as the dummy variables for their cross-sectional unit. The findings revealed that the underlying prices of shares influence ADR prices with the exchange rate and the stock market index where assets are being cross-listed. But the inclusion of dummy cross-sectional variables in the existing model enhances the predictability of the model and provides for better results. The second part of the study, which focuses on the ADR's transmission effect to the domestic market, is analysed through a fixed and random effect model, which establishes a significant relationship between the ADR portfolio and the domestic market portfolio. Thus, the study provides implications for investors who can diversify their portfolios to ADRs listed in developed country markets, i.e., the USA, by going beyond the conventional investing channels towards the emerging financial markets, which provide competitive returns over the short to long term.
Keywords: American depository receipts; ADRs; transmission effect; SUR model; fixed and random effect model; cross-listing.
Global Business and Economics Review, 2025 Vol.32 No.4, pp.402 - 417
Received: 06 Jul 2023
Accepted: 19 Oct 2023
Published online: 02 Jun 2025 *