European ADRs: what a difference a decade makes

The long-term excess returns for European American Depository Receipts (ADRs) listed on the NYSE over the period 1990 to 2009 are tested to determine differences in performance and evidence of market timing effects for the decades of the 1990s and the 2000s. While the overall sample outperformed the S&P 500 index during the first 36 months of trading by 7%, those ADRs listed before 1 January 2000 underperformed by less than 2% and those issued after outperformed the index by nearly 26%. These results suggest diversifying a portfolio internationally with European ADRs helps to overcome losses in times of market crashes and extreme volatility (as occurred in the 2000s).