| This dissertation is a collection of three interrelated essays, which focus or regression analyses of portfolio returns and risks for American Depository Receipts (ADRs). The first essay, “The Effect of Exchange-Rate and Interest-Rate Risk on ADR Pricing,” examines the ADR exposure to fluctuations in foreign exchange rates and foreign interest rates. The second essay, “ADR Portfolio Risks and Returns in Up and Down U.S. Markets,” investigates the systematic risk and risk-adjusted return performance for ADRs across up and down U.S. stock market conditions. The third essay, “The Impact of Accounting Changes and Financial Turmoil on ADR Returns,” utilizes the event-study paradigm to analyze the ADR market reactions to the announcements of U.S. GAAP changes concerning firms' financial risk disclosure, and to the occurrence of international financial crises.; In Essay One, both an APT and multi-index model are employed to incorporate exchange-rate and interest-rate exposure, and empirical results indicate that ADR portfolio returns are significantly and negatively related to the returns on the currency of the corresponding ADR-originating country/region. Returns on European and Australian ADRs are, on average, more interest-rate sensitive than returns on Asian and Latin-American ADRs. Moreover, after crises occurred in the international financial markets, there were significant shifts in the magnitude of exposure for the respective geographic area's ADRs.; The results for Essay Two indicate that between 1990 and 1997, a value-weighted, geographically-diversified ADR portfolio significantly outperformed the U.S. stock market on a systematic-risk-adjusted basis. Although the shifts in U.S. market conditions did not significantly affect the systematic risks of ADR portfolios, they did cause changes in the relative performances of various ADR portfolios against the U.S. stock market. The ADR superior performance persisted after foreign exchange-rate and interest-rate risk are accounted for.; Our findings in Essay Three indicate that during the 1990–1997 period, ADR returns on average reacted significantly to the announcements of a few FASB exposure drafts that concerned the further disclosure of a firm's exchange/interest rate exposure. In addition, during the beginning days of currency/solvency crises that occurred in Western Europe, Mexico and East Asia in the 1990s, the corresponding ADR portfolios yielded abnormal returns that are negatively significant. |
