Are the returns of Chinese American Depositary Receipts (ADR) more affected by the U.S. stock market or their underlying home market? Since there is non-synchronous trading between U.S. and the Chinese stock markets, we decompose the Chinese ADR daily returns into day and night returns to investigate the different market factors in Chinese ADR pricing. This paper also attempts to separate "homeless" ADRs from home-based ADRs to see if they are affected differently by market factors. We include a sample of 76 Chinese ADRs with the daily data from January 2000 to July 2010. Through regression and Vector Autoregressive analyses, we find that the U.S. market dominates the day returns of Chinese ADRs. We also find the Hong Kong market factor dominates the ADR night returns over the mainland China market for the whole sample. These results are particularly strong for “homeless” ADRs.

This paper investigates information transmission and price discovery mechanisms in informationally linked and non-synchronous trading markets within the multivariate generalized autoregressive conditional heteroskedasticity framework. Using daily data for copper and soybean contracts from the Chinese futures and spot markets, as well as the London Metal Exchange (LME) and Chicago Board of Trade (CBOT) futures markets, we show that there are asymmetric lead-lag relationships between any two of the three markets. We also find that the volatilities spill over from one market to another for both cases of copper and soybeans. However, the copper and soybean markets exhibit quite different patterns of information transmission. Further, we highlight the remarkable role of the Chinese futures markets in the price formation process, though the LME/CBOT futures markets are the main driving force in price discovery.