Cross-country cultural and economic freedom influences on the relationship between economic policy uncertainty and ADR mispricing
Research in International Business and Finance
; 62:101714, 2022.
Article
in English
| ScienceDirect | ID: covidwho-1937129
ABSTRACT
Extending the findings by Grossmann and Ngo (2020) that ADR mispricing is higher upon heightened U.S. economic policy uncertainty (EPU), we document that culture and economic freedom differences moderate the relationship between EPU and ADR mispricing. In line with a combined flight to safety and familiarity argument, an increase in U.S. EPU is associated with higher mispricing for ADRs from countries with cultures and economic freedom similar to the U.S. The mispricing of these ADRs is also impacted by domestic EPU considering cultural differences. This is especially the case for cultures perceived to have lower risk aversion or home bias and might be explained by the familiarity argument as well as domestic investors’ flight toward domestic stocks that have, according to the product market spill over hypothesis, more of a global exposure (e.g., cross-listed stocks). The main findings are not altered by the Covid-19 period or other robustness checks.
Full text:
Available
Collection:
Databases of international organizations
Database:
ScienceDirect
Type of study:
Randomized controlled trials
Language:
English
Journal:
Research in International Business and Finance
Year:
2022
Document Type:
Article
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