Jimmy Huang, an assistant professor in the Department of Finance, presented his paper, “Do ETFs Affect ADRs and U.S. Domestic Stocks Differently?” at the virtual Journal of International Financial Markets, Institutions and Money conference.
The paper, which Huang co-authored with University of Northern British Columbia’s Chengbo Fu and Seton Hall University’s, examines the effect of exchange traded funds (ETFs) on their underlying American depository receipts (ADRs). The authors found that ETF ownership is positively associated with stock liquidity for ADR firms, and it improves ADR firms’ information environment by helping incorporate their earnings information. The ETF ownership also helps incorporate systematic-related earnings into stock returns but not firm-specific earnings.
“Overall, our results show that ETFs are beneficial to ADR stocks by providing better liquidity and information efficiency,” said Huang.