A Reassessment of the Performance of American Depository Receipts: The Brazilian Experience

Abstract

Long-term and short-term returns of Brazilian equities traded on the New York Stock Exchange listed as American Depository Receipts (ADRs) are examined to determine whether they outperform the S&P 500 Index. The ADRs are segmented by IPOs, SEOs, and market timing. Findings suggest that the entire sample of Brazilian ADRs outperform the S&P 500 Index in short-term and long-term holding periods. Furthermore, the SEOs significantly outperform the market in both the short-term and long-term holding periods, while IPOs perform similarly to the market. Evidence suggests that market timing is a key factor in Brazilian ADR performance. Returns tend to move counter-cyclically to the U.S. bear market.