1. ADR Basics: Introduction
  2. ADR Basics: What Is An ADR?
  3. ADR Basics: Determining Price
  4. ADR Basics: Risks
  5. ADR Basics: Conclusion

There are several factors that determine the value of the ADR beyond the performance of the company. Analyzing these foreign companies involves further scrutiny than merely looking at the fundamentals. Here are some other risks that investors should consider:

  • Political Risk - Ask yourself if you think the government in the home country of the ADR is stable? For example, you might be wary of Russian Vodka Inc. because of the characteristic instability of the Russian government.
  • Exchange Rate Risk - Is the currency of the home country stable? Remember the ADR shares track the shares in the home country. If a country's currency is devalued, it will trickle down to your ADR. This can result in a big loss, even if the company had been performing well.
  • Inflationary Risk - This is an extension of the exchange rate risk. Inflation is the rate at which the general level of prices for goods and services is rising and, subsequently, purchasing power is falling. Inflation can be a big blow to business because the currency of a country with high inflation becomes less and less valuable each day.
ADR Basics: Conclusion

Related Articles
  1. Investing

    An Introduction To Depositary Receipts

    Learn about a security that allows you to invest in a foreign company through your local exchange.
  2. Investing

    Investing in Foreign Stocks: ADRs and GDRs

    Depositary Receipts are easy ways to invest in foreign stocks, regardless of what part of the world you live in.
  3. Investing

    Investing Beyond Your Borders

    Investing abroad poses risks, but can also help you diversify. Discover ways to invest in foreign stocks.
  4. Insights

    Most Powerful And Influential Public Companies In 3 Metrics

    There are many ways to rank the word's most powerful companies. Looking at market value, brand value or sales revenue are all methods used to rank the biggest companies in the world.
  5. Insights

    Ever Wanted to Own International Stocks? Here's How

    Tips and strategies for users to trade in different exchanges around the world.
  6. Investing

    Playing It Safe In Foreign Stock Markets

    Find out some of the lower-risk ways to invest in foreign markets.
  7. Investing

    The 3 Biggest Risks Faced By International Investors

    Investing internationally is a great way to diversify your portfolio, but you need to know the risks.
  8. Trading

    Main Factors that Influence Exchange Rates

    The exchange rate is one of the most important determinants of a country's relative level of economic health and can impact your returns.
  9. Investing

    How U.S Investors Can Buy Nintendo Stock (NTDOY)

    Those who wish to buy stock in Nintendo due to the success of "Pokemon Go" can do so on U.S. exchanges. Find out how.
Frequently Asked Questions
  1. Depreciation Can Shield Taxes, Bolster Cash Flow

    Depreciation can be used as a tax-deductible expense to reduce tax costs, bolstering cash flow
  2. What schools did Warren Buffett attend on his way to getting his science and economics degrees?

    Learn how Warren Buffett became so successful through his attendance at multiple prestigious schools and his real-world experiences.
  3. How many attempts at each CFA exam is a candidate permitted?

    The CFA Institute allows an individual an unlimited amount of attempts at each examination.Although you can attempt the examination ...
  4. What's the average salary of a market research analyst?

    Learn about average stock market analyst salaries in the U.S. and different factors that affect salaries and overall levels ...
Trading Center