Latin American ADR performance: How do issue type and issue date affect long term excess returns?

摘要

Purpose - The purpose of this study is to determine whether Latin American ADRs provided US investors with international diversification benefits as determined by comparing excess returns from issues listed in the 1990s to those listed in the 2000s. A further sample breakdown compares IPO returns to SEO returns. Design/methodology/approach - Standard ADR return methodology used in many previous studies is utilized to compute and test excess returns. This methodology is the same as the standard methodology used in IPO studies. Findings - The total Latin American ADR sample returned roughly the same as the S&P 500 index for the three year holding period; however, those issued before 2000 underperformed the index by nearly 19 percent while those listed after January 1,2000 outperformed the index by nearly 58 percent. The excess returns of IPOs were nearly 50 percent less than SEOs when compared to the index. Also, both IPOs and SEOs listed after the new millennium began drastically outperformed those listed in the 1990s (when compared to the S&P 500 index). Originality/value - This study differs from previous studies by emphasizing differences in return behaviour for Latin American ADRs listed during a decade of steady sustained growth (the 1990s) versus those listed in the 2000s when the US stock market encountered times of extreme return volatility. The implications of the return differences help determine whether these ADRs provided investors with true diversification benefits. Also, the dataset includes fresh results for ADRs listed during and trading through the mortgage crisis of 2008.