This study looks at the characteristics and performance of ADRs in international and global indexes. We find that ADRs in EAFE are tilted toward three common factors: giant cap, high dividend yield, and U.K. stocks. In terms of risk-adjusted performance, we find that ADRs provide inefficient diversification for US investors, as tradeoffs of return and risk are better with portfolio combinations of the S&P500 and the S&P Global 700, as compared with portfolio combinations of the S&P500 and an ADR breakout of the Global 700. Our findings on ADR characteristics are consistent with prior research, while our performance findings are inconsistent with prior research which points to ADR portfolio efficiency.
Bandopadhyaya, Arindam; Chugh, Lal; and Grant, James L., "ADR Characteristics and Performance in International and Global Indexes" (2007). Financial Services Forum Publications. 2.