Advertisement

Financial Markets and Portfolio Management

, Volume 26, Issue 4, pp 429–447 | Cite as

International equities listed on the New York stock exchange: does type of issue or date of issue matter?

  • Mark SchaubEmail author
Article

Abstract

The initial short-term (21-day) and long-term (3-year) excess returns for foreign initial public offering (IPO) and seasoned equity offering (SEO) American depository receipts (ADRs) listed on the New York stock exchange from 1990 to 2009 are tested to determine differences in performance based on type of issue and date of issue for the decades of the 1990s and the 2000s. The overall sample outperformed the S&P 500 Index by over 5 % after the first 3 years of trading; however, SEO ADRs outperformed IPO ADRs by nearly 19 % (relative to the market index). Breaking IPO and SEO ADR returns down by decade of issue shows that those listed in the 2000s for both samples drastically outperformed those listed in the 1990s in the long term. Both samples of ADRs listed in the 2000s also significantly outperformed the S&P 500 index in the first 36 months of trading. In the short-term results, for the first 21 days of trading, the SEO ADRs significantly outperformed the market by 2.1 %, while IPO ADRs outperformed by 0.97 % (though not significant).

Keywords

American depository receipts International investing International diversification Stock market timing Initial public offerings 

JEL Classification

F21 G11 G12 G14 G15 

Notes

Acknowledgments

The author acknowledges the assistance, direction, and excellent advice provided by the editor and an anonymous referee. Thanks for helping make the paper much better.

References

  1. Brav, A., Gompers, P.: Myth or reality? The long-run underperformance of initial public offerings: evidence from venture and nonventure capital-backed companies. J. Finance. 52, 1791–1821 (1997)CrossRefGoogle Scholar
  2. Callaghan, J., Kleiman, R., Sahu, A.: The market-adjusted investment performance of ADR. IPOs and SEOs. Global Finance J. 10, 123–145 (1999)CrossRefGoogle Scholar
  3. Foerster, S., Karolyi, G.A.: The long-run performance of global equity offerings. J. Financial Quant. Anal. 35, 499–528 (2000)CrossRefGoogle Scholar
  4. Giro, J.A.: The dual listing puzzle: evidence from the ADR market. Financial Markets Portfolio Manag. 11, 329–346 (1997)Google Scholar
  5. Ibbotson, R.: Price performance of common stock new issues. J. Financial Econ. 2, 235–272 (1975)CrossRefGoogle Scholar
  6. Jiang, C.: Diversification with American depository receipts: the dynamics and the pricing factors. J. Business Finance Account. 25, 683–699 (1998)CrossRefGoogle Scholar
  7. McDonald, J., Fisher, A.: New-issue stock price behavior. J. Finance. 27, 97–102 (1972)CrossRefGoogle Scholar
  8. Neuberger, B., Hammond, C.: A study of underwriters’ experience with unseasoned new issues. J. Financial Quant. Anal. 9, 165–177 (1974)CrossRefGoogle Scholar
  9. Neuberger, B., LaChapelle, C.: Unseasoned new issue price performance on three tiers: 1975–1980. Financial Manag. 12, 23–28 (1983)CrossRefGoogle Scholar
  10. Officer, D., Hoffmeister, R.: ADRs: a substitute for the real thing? J. Portfolio Manag. 13, 61–65 (1988)CrossRefGoogle Scholar
  11. Ritter, J.: The long-run performance of initial public offerings. J. Finance. 46, 3–27 (1991)CrossRefGoogle Scholar
  12. Schaub, M.: Investment performance of American depository receipts listed on the New York stock exchange: long and short. J. Business Econ. Stud. 9, 1–19 (2003)Google Scholar
  13. Schaub, M.: Market timing wealth effects of Asia Pacific and European ADRs traded on the NYSE. Appl. Financial Econ. 14, 1059–1066 (2004)CrossRefGoogle Scholar
  14. Schaub, M.: Market timing effects on the investment performance of NASDAQ-listed ADRs: the cases of emerging and developed market issues. J. Invest. 16, 119–126 (2007)CrossRefGoogle Scholar
  15. Schaub, M.: NASDAQ-listed European and Asia Pacific ADRs: does market timing affect long-term performance? Appl. Financial Econ. 19, 339–345 (2009)CrossRefGoogle Scholar
  16. Schaub, M., Highfield, M.: The short and long term performance of IPOs and SEOs traded as American depository deceipts: does timing matter? J. Asset Manag. 5, 263–271 (2004)CrossRefGoogle Scholar
  17. Schaub, M., Highfield, M.: Market timing wealth effects of American depository receipts: the cases of emerging and developed market issues. J. Int. Financial Markets Inst. Money. 16, 270–282 (2006)CrossRefGoogle Scholar
  18. Wildmann, C.: What drives portfolio investments of German banks in emerging capital markets? Financial Markets Portfolio Manag. 25, 197–231 (2011)CrossRefGoogle Scholar

Copyright information

© Swiss Society for Financial Market Research 2012

Authors and Affiliations

  1. 1.Northwestern State University of LouisianaNatchitochesUSA

Personalised recommendations