Industry co-movements of American depository receipts: Evidences from the copula approaches

Abstract

This paper applies the distinct copula model specifications with time-invariant and time-varying dependence structures to investigate whether American depository receipts (ADRs) co-move more with the industry indexes of home country or the U.S. The evidence shows that ADR returns are more significantly linked with the industry returns of parent country than those of the U.S., supporting the hypothesis that the ADR industry co-movement is regionalized. Next, using the co-movement measures as dependent variables, we explore whether the ADR factors influence the industry co-movement. ADR fundamental and financial factors are the key variables that influence ADR industry co-movements with the U.S. and home country. As for ADR ownership factors, only mutual fund and invest adviser holdings influence ADR industry co-movement with home country.