American Depositary Receipt (ADR)
A dollar-denominated receipt for foreign shares, traded in the US.
What is American Depositary Receipt (ADR)?
Issued by a US bank holding the underlying foreign shares. ADRs trade on US exchanges or over the counter, pay dividends in dollars, and simplify owning foreign companies. They still carry currency risk and political risk, and foreign taxes may be withheld from dividends (often creditable against US tax).
American Depositary Receipt (ADR): a worked example
A US investor buys a Japanese automaker's ADR on the NYSE in dollars instead of buying in Tokyo in yen.
More terms in Equities, Funds & Alternatives
Shareholder Rights (Statutory vs. Cumulative Voting)
Voting, preemptive rights, dividends when declared, inspection, limited liability.
Types of Preferred Stock
Cumulative, convertible, callable, participating, and floating-rate preferred.
Rights vs. Warrants
Rights: short-term, below market. Warrants: long-term, above market.
Restricted & Control Stock (Rule 144)
Unregistered or insider-held stock with resale limits.
Employee Stock Options (ISO vs. NSO)
Incentive options get capital gains treatment; nonqualified options create income at exercise.
Technical Analysis
Forecasting prices from charts, trends, and trading volume.
Fundamental Analysis
Valuing a company from its financial statements, management, and industry.
Dividend Discount Model
A stock is worth the present value of its future dividends.