Foreign Financial Institution Equities: Returns From Emerging Markets And Developed Markets Differ

Abstract

With the vicissitude of the capital markets, investors continually seek new and innovative techniques that will identify securities that outperform the market. In addition to the usual fundamental and technical analysis, the international markets may provide enhanced profit potential. Investors may purchase securities of foreign companies to gain greater diversity and new investment opportunities.

American Depository Receipts: A Case Study Of The Performance Of Foreign Manufacturing Firm Equities Listed On The New York Stock Exchange

“…When ADRs are segmented by firms from emerging markets and developed markets, no significant difference exists in performance relative to the S&P 500 Index during the 21-day holding period. This differs from the findings of Elliott and Schaub (2005) who reveal that financial institution ADRs from developed markets significantly outperform the S&P 500 in the long-term.…”

“…Evidence, however, indicates that IPOs significantly out-perform the S&P 500 Index in early trading while no significant difference in performance exists for SEOs. These finding are contrary to the results from financial institution ADRs by Elliott and Schaub (2005). When ADRs are segmented by firms from emerging markets and developed markets, no significant difference exists in performance relative to the S&P 500 Index during the 21-day holding period.…”

“…There is no significant difference in performance of the ADRs relative to the performance of the S&P 500 Index. These findings are consistent with those of Elliott and Schaub (2005) and Schaub (2003b), and are contrary to those of Callaghan, Kleiman, and Sahu (1999) who find significant excess returns during short and long-term holding periods and Foerster and Karolyi (2000) who find significant underperformance. Evidence, however, indicates that IPOs significantly out-perform the S&P 500 Index in early trading while no significant difference in performance exists for SEOs.…”

“…Those issued after May 1, 2000 underperformed the index by 1.4 percent in the first month of trading. Elliott and Schaub (2005) find long-run returns for financial institution ADRs from developed markets significantly outperformed the S&P 500 by 15.17 percent while emerging market firms perform similar to the market index. Interestingly, SEOs significantly outperformed the S&P 500 by 20.69 percent while the IPOs show no significant difference in performance relative to the S&P 500.…”

Performance Of Chilean ADRs On The New York Stock Exchange

“…In addition, the authors find that ADRs from emerging markets outperform ADRs from developed markets. In contrast, during a 36-month holding-period, Elliott W and Schaub (2005) find that financial institution ADRs from developed markets outperform the S&P 500 Index while ADRs from emerging markets perform similar to the market index. Examining the effects of market timing, Schaub and Highfield (2006) discover that emerging market ADRs issued during a bull market under-perform the S&P 500 Index while ADRs issued during a bear market outperform the market index.…”