@TechReport{dp-572,
  author        = {Eichler, Stefan and Roevekamp, Ingmar},
  astring       = {Stefan Eichler and Ingmar Roevekamp},
  title         = {A market-based indicator of currency risk: Evidence from
                  American Depositary Receipts},
  month         = {February},
  year          = {2016},
  pages         = {42},
  number        = {572},
  language      = {en},
  keywords      = {Currency risk, Currency crises, American Depositary
                  Receipts, Emerging markets},
  jelclass      = {F31; F37; G12; G15},
  abstract      = {We introduce a novel currency risk measure based on
                  American Depositary Receipts (ADRs). Using a multifactor
                  pricing model, we exploit ADR investors’ exposure to
                  potential devaluation losses to derive an indicator of
                  currency risk. Using weekly data for a sample of 831 ADRs
                  located in 23 emerging markets over the 1994-2014 period,
                  we find that a deterioration in the fiscal and current
                  account balance, as well as higher inflation, increases
                  currency risk. Interaction models reveal that these
                  macroeconomic fundamentals drive currency risk,
                  particularly in countries with managed exchange rates, low
                  levels of foreign exchange reserves and a poor sovereign
                  credit rating.}
}