Nested Causality of American Depositary Receipts and Underlying Original Shares
Date Issued
2004
Date
2004
Author(s)
Cheng, Yin-Man
DOI
en-US
Abstract
The main objective of this study is to examine the relation between ADRs and Taiwanese stocks is independency, contemporaneous relation, unidirectional relation, or feedback relation, which is defined by Granger (1969). Chen and Lee (1990) provided nested causality tests which apply multiple hypotheses testing procedure to identify the nature of the relationship between two financial series.
There are three findings in our study. First, the final result of nested causality tests, feedback relations exist in Taiwan Semiconductor Manufacturing Co., United Microelectronics Corporation, AU Optronics Corporation, and Advanced Semiconductor Engineering Inc as well as unidirectional relations from ADRs to original shares in Macronix International Company Limited and Siliconware Precision Ind., Co. Ltd. as a result of different infrastructure in the NYSE and Nasdaq stock market. Second, in the cases of Macronix International Company Limited, and Siliconware Precision Ind., Co. Ltd. shows a unidirectional relation from ADRs to Taiwanese stocks. It’s plausible that different level of legal restriction, corporate governance, and requirement of foreign exchange, force companies engaged in cross-border listing to keep information transparency. The last is that past return of ADRs, are always significantly positive related to current return of Taiwanese stocks, then we can take this as a investment guide for buying Taiwanese stock by watching past performance of ADRs.
Subjects
VAR模型
網狀因果關係
Nested causality
VAR model
American Depositary Receipts
Type
thesis
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