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Volume 60, Issue 2

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Does ADR Listing Affect the Dynamics of Volatility in Emerging Markets?

Akdeniz, Levent; Altay-Salih, Aslihan; Umutlu, Mehmet

Year: 2010   Volume: 60   Issue: 2   Pages: 122-137

Abstract: This paper analyzes the time-series variation in the return volatility of non-US stocks from emerging markets that are cross-listed on US exchanges. Unlike previous studies in the cross-listing literature, return volatility is modeled using conditional heteroscedasticity models. We find that firms’ exposure to risks such as local and global market betas remain unchanged after cross-listing. Moreover, we do not identify notable changes in the dynamics of the volatility of cross-listed stocks after cross-listing except for leverage effects. We further show that the mean level of conditional variance is not affected after cross-listing. Thus, our results provide counter-evidence to the belief that foreign investor participation drives volatility upward.

JEL classification: C22, F36, G15

Keywords: return volatility, adr, egarch, cross-listing, emerging markets

RePEc: http://ideas.repec.org/a/fau/fauart/v60y2010i2p122-137.html

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