The Act Of Investing Money For Your Own Country 's Stock Market

1101 Words Oct 6th, 2014 5 Pages
Introduction
The act of investing money in your own country’s stock market is relatively easy. All you need to do is get a hold of your stock broker or log into your online account and place a buy or sell order. On the flip side, investing in a company that is listed on a foreign stock exchange is much more complicated. Where would one begin? However, now there is an easier way to invest in foreign markets from the U.S, this is through the American Depositary Receipts (ADRs). According to Investopedia, there are more than 2,000 foreign companies world-wide that provide this option for U.S and Canadian investors interested in buying shares. The purpose of this research paper is to define what an ADR is, explain how ADRs work, mention the different types of ADRs, and lastly, outline the risks and benefits of ADRs to US investors and issuers.
American Depositary Receipt
Investopedia defines American Depositary Receipt as a negotiable stock that trades in the United States but represents a specified number of shares in a foreign corporation. ADRs are bought and sold in American markets like normal stocks, and are distributed or sponsored in the U.S. by a depositary bank or brokerage. Investopedia confirms that ADRs were introduced to the financial markets in 1927, as a result of the complexities involved in buying shares in foreign countries and the difficulties related to trading at different prices and currencies. It is because of this that the U.S banks purchase huge…
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