Mark Schaub

Market timing effects on the investment performance of Asia-Pacific and European ADRs listed on the New York stock exchange

This study tests early and aftermarket returns of Asia-Pacific and European equities traded on the New York Stock Exchange as American Depository Receipts (ADRs) for a period of three years from the date of issue. The results provide evidence that the US markets overpriced on average the Asian ADRs for the entire sample period from January 1987 through September 2000. However, while the sample of Asia-Pacific equities issued from January 1987 through May 1998 underperformed the S&P 500 by almost 23%, the ADRs issued from May 1998 through September 2000 returned roughly the same as the S&P 500 for the three-year bear market holding period. These results may suggest timing of Asia-Pacific ADR issuance affects excess returns over the S&P 500 in the long run. On the other hand, the performance of the European ADR sample was roughly the same as the S&P 500 regardless of when issued.

Investor overreaction to going concern audit opinion announcements

The finance literature extensively documents the existence of stock market anomalies, such as the January effect, the day of the week effect and the small firm effect. Many of these anomalies were discovered or clarified while investigating what has come to be known as the overreaction hypothesis. This paper examines investor overreaction to going concern audit opinion announcements made in the major financial press. The evidence presented suggests the sell-off by investors on the announcement date is followed by a major buy-back of the announcing firms’ shares over the next few days. For the 79 announcing firms in the sample spanning 1984 to 1996, nearly 70% of the average losses on the announcement date are recovered the five days following going concern audit opinion announcements.

NASDAQ-listed European and Asia Pacific ADRs: does market-timing affect long-term performance?

The long-term excess returns for European and Asia Pacific American Depository Receipts (ADRs) listed on the National Association of Securities Dealers Automated Quotations (NASDAQ) from 1990 to 2002 are tested to determine differences in performance and evidence of market-timing effects. While the overall sample outperformed the NASDAQ index during the first 36 months of trading by over 30%, those ADRs listed before 1 January 1998 underperformed by less than 3% while those issued after outperformed the index by nearly 48%. Breaking the sample down into European and Asia Pacific issues reveals a huge market-timing difference in performance for Asia Pacific issues and a smaller, but significant, market-timing effect for European ADRs.

Short-Term Investor Wealth Effects Associated with NASDAQ-Traded ADRs: The Cases of Emerging, Developed, and Regional Issues

This study examines the initial excess performance of the 100 American depository receipts (ADRs) listed on the NASDAQ from January 1985 through December 2001. The entire sample of ADRs shows significant positive excess performance on average for the first day of trading and the first month (21 days). Emerging market ADRs underperformed the NASDAQ Index by nearly 9%, whereas developed market ADRs outperformed the index by 7.6% in the first 21 days of trading. During the first month of trading, European ADRs significantly beat the market by more than 8.5%, and Asia-Pacific ADRs outperformed the index by more than 2%.

A note on the performance of Chinese American Depository Receipts

In this note, New York Stock Exchange-listed American Depository Receipts (ADRs) from China are examined to determine overall investment performance for the first 3 years of trading. The segmented results show that while Chinese ADRs perform roughly the same as the S&P 500 Index, those trading during the bull market under-performed the market index by over 26% while those trading through the bear market (listed after 1 January 1998) outperformed the S&P 500 by nearly 40%. Furthermore, issues from Hong Kong under-performed the S&P Index by nearly 73% while those issued from other areas of China exceeded the index by over 29%. These results provide evidence that market timing and regional issues affect portfolio returns from Chinese ADRs.

Investor reaction to regulated monopolies announcing going concern opinions: What explains contagion among electric services companies?

Purpose – This study aims to examine the industry reaction as determined by stock returns when firms in the electric services industry announced receipt of Going concern audit opinions from 1984 through 1991. Design/methodology/approach – The study utilizes standard event study methodology to test for significant excess performance. Findings – From 1984 to 1991, going concern opinion (GCO) announcements produce a contagion response in the industry on the announcement date more than half the time. Also, over the event window of the announcement date plus the five days following, six of the seven announcements were accompanied by significant negative industry reaction. Regression analysis suggests non-announcing a firms leverage and earnings correlation with the announcing firm significantly impact abnormal returns, as does the exchange on which the announcers equity is traded, the size of the announcing firm and whether nuclear plant problems were mentioned in the announcement. Research limitations/implications – The findings suggest that audit opinions provide new information for investors in the electric services industry. Also, GCO announcements in this industry normally result in contagion among rival firms. Originality/value – This paper provides insights into investor reactions to news contained in Going concern audit opinions in the electric services industry.

The early performance of American depository receipts listed on the New York Stock Exchange: Does region of issue, level of issue or type of issue matter?

Purpose –This study examines the initial two-week excess performance relative to the S&P 500 Index of American Depository Receipts (ADRs) listed on the New York Stock Exchange from January 1987 to September 2001 to determine whether short-term wealth effects exist. Design/methodology/approach - Standard intial public offering methodology is used to test for significant excess performance. Findings - Results for the entire sample of 281 ADRs suggest the initial excess performance was not significant. However, after segmenting the sample, emerging market ADRs significantly outperformed the S&P 500 by over three per cent while developed market ADRs underperformed by 0.92 per cent. Also, Latin American ADRs outperformed the market index by nearly five per cent during the first two weeks after issue while European ADRs underperformed the market by nearly one per cent. Asia Pacific ADRs underperformed the S&P 500, but not significantly in the early trading. Research limitations/implications- The findings suggest emerging market ADRs, particularly those from the Latin American region, perform well in the early trading while developed market ADRs do not. Future research may identify variables that affect or explain ADR excess returns. Originality/value - The paper provides insights into the types of ADRs that accumulate wealth in the short term investment horizon.

Market Timing Effects on the Investment Performance of NASDAQ-Listed ADRs: The Cases of Emerging and Developed Market Issues

In this study, I examine the long-term excess returns for ADRs listed on the NASDAQ from 1990 through 2002 for evidence of market timing effects. While the overall sample outperformed the NASDAQ Index during the first 36 months of trading by over 22 %, those ADRs listed before January 1, 1998 underperformed by 15 % while those issued after outperformed the index by nearly 51 %. Also, breaking the sample down into emerging versus developed market issues reveals a huge market-timing difference in performance for emerging issues and a smaller, but significant, market-timing effect for developed market ADRs.

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

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 list...

Short-term wealth effects from debt buyback announcements

This study provides evidence that, as with stock buyback announcements, investors believe that debt buyback announcements signal good news about the future cash flows of the announcing firm. This information is contained in the stock price reaction on the announcement date. On average, the firms sampled experienced an average 5.51% increase in their stock price on the day their plans to repurchase debt were announced in the financial media.