ADR means American depository receipt. I always wondered until now, why ADRs are flashed on CNBC-TV18 & how they can be useful. I found a little about ADRs on investopedia.
ADRs trade just like stocks but represent shares of a foreign company trading on a foreign stock exchange. After they are listed, demand & supply determine their prices.
How ADRs can be useful to me?
Price of ADR is affected by the speculation about the future performance of company, stability of economy of home country & its currency. If political & currency scenario remains unchanged, ADR movement may help to determine the movement of market price of stock in our market as large portion of trade volume in India is contributed by FIIs. ADRs can be a good barometer of global perception of our stocks. In fact, the useful tool will be the calculation of opening price of stock by using ADR price & dollar-rupee conversion ratio. Calculated price & actual market price should be in unison; because as long as they do not move together, there is scope for arbitrage.
ADR prices are available on:
http://www.equitymaster.com/stockquotes/adr.asp
NOTE: Please check the date on the page before actually using the data.
ADR prices must also be available on the exchanges where they are traded e.g. Nasdaq, NYSE etc. Finding the link where market prices are given, on sites of these stock exchanges, remains to be done.
I cannot wait to implement my hypothesis.
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