Personal Finance & Money Asked on May 31, 2021
The price of an ADR is based on its underlying security’s price on its home stock exchange. However, the home stock exchange is not necessarily open during the same hours as the US stock market. During those hours where the home stock exchange is closed, what are ADR prices based on?
Take BNP Paribas ADR (BNPQY) as an example. Where does its price come from during those hours when the Euronext Paris stock exchange is closed?
ADRs are not options, they are certificates that are traded independently. Therefore, ADRs in this regard are pretty much like a stock that is traded on multiple exchanges. Supply and demand determine the price and arbitrage makes sure that prices do not diverge too much
Correct answer by Manziel on May 31, 2021
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