Financial Returns of Pharmaceutical American Depository Receipts (ADRs): Do They Perform Better than U.S. Pharmaceuticals or S&P 500?

Group Affiliation: 
- Private group -
Society of Interdisciplinary Business Research
Subhashis Nandy, Fiona Sussan
Presentation Date: 
Saturday, September 30, 2017
Event or Conference: 
SIBR Conference On Interdisciplinary Business & Economics Reearch
Presentation Type: 
Paper Presentation
Boyer's Domain: 
Presentation Location: 
Hong Kong S.A.R., China
Abstract: 
Purpose: The purpose of this research is to determine the median Sharpe ratios and the risk-adjusted buy-and-hold returns of all foreign pharmaceutical American Depository Receipts (ADRs) listed on New York Stock Exchange (NYSE), and whether the median Sharpe ratios and the risk-adjusted buy-and-hold returns of all foreign pharmaceutical ADRs are same as the median Sharpe ratios and the risk-adjusted returns of US Pharmaceutical companies, and of S&P 500 index for a period of seventeen years, from 2000 through 2016. Design/Methodology/Approach: Standard calculation methodology is used to determine the Sharpe ratios and the risk-adjusted buy-and-hold returns. Non-parametric hypothesis tests are used to compare the median Sharpe ratios, the median risk-adjusted buy-and-hold returns of foreign pharmaceutical ADRs, equities of large US pharmaceutical companies and S&P 500 index. Non-parametric hypothesis tests assume non-normal distributions in the Sharpe ratios and the risk-adjusted buy-and-hold returns, and reduce the risk of Type I error in hypothesis tests. Findings: At 5% level of significance, the null hypothesis that the distributions of Sharpe ratios of foreign ADRs, equities of US large pharmaceutical companies, and S&P 500 index have the same medians cannot be rejected. On the other hand, at 5% level of significance, the null hypothesis that the distributions of risk-adjusted buy-and-hold returns of foreign ADRs, equities of US large pharmaceutical companies, and S&P 500 index have the same medians can be rejected. Originality/value: This study is different from previous studies because of the direct hypothesis testing of the similarity of the median Sharpe ratios, the risk-adjusted buy-and-hold returns of individual foreign pharmaceutical ADRs, equities of large US pharmaceutical companies and S&P 500 index from 2000 through 2016. This study does not sum the daily average excess returns of individual ADRs. in order to calculate the cumulative daily excess returns of all ADRs as a single entity like earlier research work. The findings are important because this study shows that the final seventeen-year (2000-2016) buy-and-hold returns of only a couple of foreign pharmaceutical ADRs exceed the final seventeen-year (2000-2016) buy-and-hold return of S&P 500 index. Thus, S&P 500 index may be a judicious investment for some financial investors.