Abstract
This paper provides an empirical analysis of 123 American depositary receipts (ADRs) from 16 countries. The paper finds that the returns on ADRs have significant risk exposures to the returns on the world market portfolio and their respective home market portfolios. Further, ADRs do not have significant risk exposures to changes in their home currency’s exchange rates. In explaining variations in ADR returns, a multi-factor model with the world market return and the home market return as the risk factors performs better than models with just the world market return, the home market return or a set of global factors as the risk factors.
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