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|Title:||Efficiency of Indian ADRs and their underlying stocks: An Adaptive Market Perspective from Nonlinear Models|
|Publisher:||INDIAN INSTITUTE OF MANAGEMENT CALCUTTA|
|Series/Report no.:||WORKING PAPER SERIES;WPS No. 785 July 2016|
|Abstract:||This paper is aimed at examining the efficiency of Level II/III Indian ADRs and their underlying stocks trading in Mumbai from a nonlinear univariate perspective. For this purpose, we consider the ADRs and the underlying stocks pertaining to Dr. Reddy’s Laboratories, HDFC Bank, ICICI Bank, Infosys, Wipro, Tata Motors, and Sterlite Industries. We employ the windowed as well as the rolling hinich bicorrelation test procedures in an attempt to seek answers to hitherto-unanswered questions pertaining to Indian ADRs. Findings indicate that the degree of efficiency of all US/Indian scrips considered for this study is heterogeneous in nature and thereby warrant a ranking approach in each trading location. At a granular level, in the case of US, Infosys ADR and Sterlite Industries ADR were found to be more efficient than the overall US stock market (S&P 500). Similarly, in the case of India, Infosys, Wipro, Tata Motors scrips were found to be more efficient than the overall Indian stock market (Nifty). Further, the degree of efficiency of dually-listed stocks such as, and limited to, Dr. Reddy’s Laboratories, HDFC Bank, Wipro, and Tata Motors, was found to be homogenous across trading locations, while the degree of efficiency of dually-listed stocks such as, and limited to, ICICI Bank, Infosys and Sterlite Industries, were found to lack homogeneity across trading locations. The collective take-away from this study is two-fold in nature. Firstly, the degree of market efficiency witnessed at the level of individual scrips differs considerably from the degree of efficiency of the broader stock market in which such scrips trade. Secondly, the degree of efficiency witnessed in certain (not all) dually-listed scrips considered for this study was found to be homogenous across trading locations. However, this does not happen to be the case for all other dually-listed scrips considered for this study.|
|Appears in Collections:||2016|
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