NEWS RELEASE

Contact: David West (west@nsula.edu )
News Bureau
Northwestern State University
Natchitoches, LA 71497
(318) 357-6466

11/19/2003

FOR IMMEDIATE RELEASE

NATCHITOCHES-Investors who try to diversify their portfolios by purchasing foreign stocks through ADRs (American Depository Receipts) usually fail to keep up with one of the most widely followed market indexes. Northwestern State University Associate Professor of Finance Mark Schaub examined early and aftermarket returns of ADRs in an article to be published in the Winter issue of the Journal of Business and Economic Studies.

Schaub's article, "Investment Performance of American Depository Receipts Listed on the New York Stock Exchange: Long and Short," provided evidence that U.S. markets overprice ADRs in the short and long term.

"The underperformance of ADRs is most severe for initial public offering (IPO) issues as compared to seasoned equity offerings (SEOs), emerging market issues as compared to developed market issues and Latin American ADRs as compared to those issued by firms headquartered in Europe and the Asia Pacific region," said Schaub. "These results confirm ADRs behave as domestic IPOs in the long term-that is, they underperform. However, the ADRs in this sample did not accumulate the significant abnormal gains in the short term reported by other IPO and ADR studies."

According to Schaub, most companies wait until the stock market is booming to
issue new equity so they can get a higher price than they are really worth.

The article is one of 14 journal articles published by Schaub since he joined Northwestern's faculty in the spring of 2002. He has also made six presentations and had articles placed in six proceedings.

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