International Diversification: A Comparison of Performance of American Depository Receipt Indices and Country Funds

Financial Decisions, Vol. 14, No. 1, pp. 1-26, Fall 2004

Posted: 3 Sep 2010

See all articles by Mary Schmid Daugherty

Mary Schmid Daugherty

University of St. Thomas - Department of Financial Management

Thadavillil Jithendranathan

University of St. Thomas - Department of Financial Management

Date Written: April 8, 2004

Abstract

This study evaluates country funds versus American Depository Receipts (ADRs) as tools for international diversification. A portfolio of available ADRs from a specific country (i.e. an ADR index) should provide similar returns to an indexed country fund. We found, however, that ADRs provided superior returns in the majority of cases. This study also attempts to evaluate the impact of trading volume on portfolio performance. In comparison to ADR indices, the country funds had generally higher trading volume. The results of causality tests, though, were mixed, and more research over a longer time period may be needed to address this issue.

Keywords: American Depository Receipts, Country Funds

JEL Classification: F37, G15

Suggested Citation

Schmid Daugherty, Mary and Jithendranathan, Thadavillil, International Diversification: A Comparison of Performance of American Depository Receipt Indices and Country Funds (April 8, 2004). Financial Decisions, Vol. 14, No. 1, pp. 1-26, Fall 2004, Available at SSRN: https://ssrn.com/abstract=1670748

Mary Schmid Daugherty

University of St. Thomas - Department of Financial Management ( email )

1000 LaSalle Ave
St. Paul, MN 55403
United States

Thadavillil Jithendranathan (Contact Author)

University of St. Thomas - Department of Financial Management ( email )

1000 LaSalle Ave
St. Paul, MN 55403
United States
651-962-5123 (Phone)
651-962-5093 (Fax)

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