What causes persistent ADR premiums or discounts?

Persistent premia arise from capital controls (investors cannot arbitrage freely), investor preference for liquid US-listed shares, differential custody costs, and information asymmetry. Argentine ADRs traded at 80–90% premiums to local shares during 2019–2020 capital controls due to FX restrictions preventing arbitrage.

What is the typical ADR ratio and how does it affect the conversion?

ADR ratio defines how many local shares one ADR represents. For example, a 1:5 ADR ratio means 1 ADR equals 5 local shares. ADR price = local share price x exchange rate x ADR ratio. Adjustments for dividends paid in local currency, withholding taxes, and depositary fees affect total return comparisons.

ADR Premium to Local Share Price

Calculate American Depositary Receipt (ADR) premium or discount to the underlying local share price adjusted for the exchange rate and ADR ratio, identifying cross-market arbitrage opportunities.

Principal ($)

Annual Rate (%)

Years

Compounding / Year

$ Finance Disclaimer: These calculators are for educational and illustrative purposes only. Results do not constitute financial advice. Consult a licensed financial advisor before making investment or borrowing decisions.

How to Use

Enter the values for the scenario you are assessing. Calculate American Depositary Receipt (ADR) premium or discount to the underlying local share price adjusted for the exchange rate and ADR ratio, identifying cross-market arbitrage opportunities. Use the adr premium result to inform your calculation.

Related Calculators

PPP Exchange Rate

Finance Long-tail

EM Risk Premium