Return Commonality in Cross Listings : Evidence from Hong Kong ADRs

In a return commonality framework, the authors estimate portfolio betas associated with changes in returns of 15 Chinese ADRs and their underlying H-shares, where the portfolios denote hosts (NYSE and SHSE) and home (Hang Seng) markets, and their returns are common determinants of ADRs and H-shares returns. In addition, the authors test whether returns on ADRs and H-shares portfolios determine their component ADRs and H-shares returns. Using a quantile regression methodology, the authors estimate those betas for four sample quartiles. The authors' results indicate an asymmetric impact of changes in portfolio returns on changes in ADR and H-share returns; further, the asymmetries are enhanced across return quartiles. The authors interpret the market impact on ADR and H-share returns as denoting investor sentiments