THE INTERNATIONAL IMPACT OF FEDERAL-RESERVE-BANK DISCOUNT RATE CHANGES - EVIDENCE FROM AMERICAN DEPOSITORY RECEIPTS

Previous studies have found that American equity values move inversely to the direction of announced discount rate changes by the Federal Re serve Bank. In this study of the return behavior of a sample of Americ an depository receipts (ADRs) to announcements of discount rate change s, we find no evidence of such a relationship. Indeed, ADRs exhibit no significant response to either rate increases or decreases. Our resul ts hold for both market realignment and policy motivated changes. Thes e findings suggest that ADRs can provide diversification to the Americ an investor as international economies and monetary policies remain in completely integrated.