Abstract
Are the returns of Chinese ADRs more affected by the U.S. stock market or their underlying home market? Since there is non-synchronous trading between U.S. and the Chinese stock markets, we decompose the Chinese ADR daily returns into day and night returns to investigate the different market factors in Chinese ADR pricing. This paper also attempts to separate homeless ADRs from home-based ADRs to see if they are affected differently by market factors. We include a sample of 76 Chinese ADRs with the daily data from January 2000 to July 2010. Through regression and VAR analysis, we find that the U.S. market dominate the day returns of Chinese ADRs, and the Hong Kong market factor dominate the ADR night returns over the mainland China market for the whole sample. These results are particularly strong for “homeless” ADRs.
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