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PRICE TRANSMISSION DYNAMICS BETWEEN ADRs AND THEIR UNDERLYING FOREIGN SECURITY: THE CASE OF BANCO DE COLOMBIA S.A.- BANCOLOMBIA

Estudios Gerenciales

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Title PRICE TRANSMISSION DYNAMICS BETWEEN ADRs AND THEIR UNDERLYING FOREIGN SECURITY: THE CASE OF BANCO DE COLOMBIA S.A.- BANCOLOMBIA
PRICE TRANSMISSION DYNAMICS BETWEEN ADRs AND THEIR UNDERLYING FOREIGN SECURITY: THE CASE OF BANCO DE COLOMBIA S.A.- BANCOLOMBIA (Artículo publicado en inglés)
PRICE TRANSMISSION DYNAMICS BETWEEN ADRs AND THEIR UNDERLYING FOREIGN SECURITY: THE CASE OF BANCO DE COLOMBIA S.A.- BANCOLOMBIA (publicado em inglês)
 
Creator Berggrun, Luis
 
Subject American Depositary Receipts; stationarity (unit root) tests; cointegration; vector error correction model; impulse response functions; forecast error variance decomposition
Vector Error Correction Model; Cointegration; Stationarity (Unit root) test; American Depositary Receipts
 
Description This paper analyzes the dynamics of the American Depositary Receipt (ADR) of a Colombian bank (Bancolombia) in relation to its pricing factors (underlying (preferred)shares price, exchange rate and the US market index). The aim is to test if there is a long-term relation among these variables that would imply predictability. One cointegrating relation is found allowing the use of a vector error correction model to examine the transmission of shocks to the underlying prices, the exchange rate, and the US market index. The main finding of this paper is that in the short run, the underlying share price seems to adjust after changes in the ADR price, pointing to the fact that the NYSE (trading market for the ADR) leads the Colombian market.  However, in the long run, both, the underlying share price and the ADR price, adjust to changes in one another.
This paper analyzes the dynamics of the American Depositary Receipt (ADR) of a Colombian bank (Bancolombia) in relation to its pricing factors (underlying (preferred)shares price, exchange rate and the US market index). The aim is to test if there is a long-term relation among these variables that would imply predictability. One cointegrating relation is found allowing the use of a vector error correction model to examine the transmission of shocks to the underlying prices, the exchange rate, and the US market index. The main finding of this paper is that in the short run, the underlying share price seems to adjust after changes in the ADR price, pointing to the fact that the NYSE (trading market for the ADR) leads the Colombian market.  However, in the long run, both, the underlying share price and the ADR price, adjust to changes in one another.
 
Publisher Universidad Icesi
 
Date 2005-12-31
 
Type info:eu-repo/semantics/article
info:eu-repo/semantics/publishedVersion
 
Format application/pdf
text/html
 
Identifier http://www.icesi.edu.co/revistas/index.php/estudios_gerenciales/article/view/175
 
Source Estudios Gerenciales; No. 97 Oct-Dic 2005; 13-30
01235923
 
Language eng
spa
 
Relation http://www.icesi.edu.co/revistas/index.php/estudios_gerenciales/article/view/175/pdf
http://www.icesi.edu.co/revistas/index.php/estudios_gerenciales/article/view/175/html
 
Coverage Colombia de Lat: 04 00 00 N degrees minutes Lat: 4.0000 decimal degrees Long: 072 00 00 W degrees minutes Long: -72.0000 decimal degrees
Colombia de Lat: 04 00 00 N degrees minutes Lat: 4.0000 decimal degrees Long: 072 00 00 W degrees minutes Long: -72.0000 decimal degrees
Colombia de Lat: 04 00 00 N degrees minutes Lat: 4.0000 decimal degrees Long: 072 00 00 W degrees minutes Long: -72.0000 decimal degrees