1st Edition

Law of One Price A Chronicle of Dually Listed Indian Stocks

By Vinodh Madhavan, Partha Ray Copyright 2023
    104 Pages 15 B/W Illustrations
    by Routledge

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    Law of one price continues to be a central tenet of Financial Economics. This book is devoted towards examining law of one price in the context of dually-listed shares of Indian companies.

    Put simply, this book delves on the relationship between the prices of domestic shares issued by Indian companies and the prices of foreign shares issued by the same companies. It also examines the evolving uncertainty in relationships between such dually-listed shares issued by Indian companies. It draws upon the insights that we garnered over the years while working on technical papers in this area.

    The book, thus, undertakes concerted efforts to present facts in a manner that sensitise and meaningfully inform readers of the prevalent breadth and depth of dual-listing (cross-listing) landscape globally and more so, locally (India).

    List of Figures

    List of Tables



    1. Introduction

    2. Depository Receipts: Global Trends and the Indian Story

    3. Is the World Flat?: Domestic Share Prices vis-à-vis the prices of their Depositary Receipts

    4. Conclusion




    Vinodh Madhavan; Ahmedabad University, Ahmedabad, India

    Partha Ray; National Institute of Bank Management, Pune, India

    "The authors promise and subsequently deliver on their promise, to present the world of Depository Receipts (DRs) to the readers in a simple and logical manner. The narrative is both logical and highly relevant to the current times. As the Indian start-up ecosystem continues to bloom and boom, businesses have been on the lookout to raise credit on good terms from both domestic and international sources. Therefore, this book makes an excellent read and would greatly benefit students and researchers in the field of finance, as well as business professionals looking to understand the DR route for raising overseas capital. The book draws well researched and evidence-backed inferences on the behaviour of dually listed stocks of Indian companies and the transmission of shocks from domestic market to the foreign exchanges."

    V. Anantha Nageswaran, Chief Economic Advisor, Ministry of Finance, Government of India


    "Professors Madhavan and Ray have written a fascinating book that gives readers a view behind the scenes of the theoretical and practical aspects of investing in emerging markets using the vehicle of American Depository Receipts (ADRs). ADRs, as the authors discuss in detail are shares of overseas companies that are listed on US exchanges. With its focus on Indian shares, this book fills an important gap for scholars and practitioners in international business and international finance interested in understanding the new investment opportunities arising in this rapidly growing market. Highly recommended!"

    Lorne Nelson Switzer, Professor of Finance and Van Berkom Endowed Chair in Small-Cap Equities, John Molson School of Business, Concordia University, Canada


    "A very interesting book on dually listed equities with listings in Mumbai and New York - one of the very few books that demystifies the complexities related to dual listings and relevant market issues pertaining to the domestic stock market as the foreign exchange market for an average reader. The book delves into the issues of Depository Receipts (DRs) and the linkage it has with the parent stock in the domestic market. Not only does the book give a theoretical background of DRs, but also discusses in detail a number of DRs that have been issued and these are across sectors and industries. The book also explains the issues related to the "Impossible Trinity" extremely well as well as the regulatory issues that one needs to be aware of. Relevant data from across the world, with special emphasis on the Indian markets, have been presented to make the theoretical explanation even easier to understand."

    Sankarshan Basu, Professor of Finance & Accounting, Indian Institute of Management, Bangalore

    "The book ... presents an excellent insight into the story of Depository Receipts (DRs) in a very factual manner. To any reader on the lookout for an authentic account of DRs issued by Indian companies and their price trends, correlations, and volatility linkages, this book is an essential go-to book. The book unfolds the conceptual basics of DR in a simple and understandable style even to a lay reader and guides the reader systematically through the background policy rationale before delving into analytical aspects of price trends and the correlations between the prices prevailing in the domestic market and abroad. In passing, the book manages to pinpoint some regulatory issues, which, if handled better, would pave the way for the instrument to become a potent fundraising instrument for companies in India. The book offers enough fodder to the regulatory think tanks to have a thorough relook at the regulatory landscape. All in all, a valuable addition to the knowledge base of a keen market observer."

    G. Mahalingam, Former Whole Time Member, Securities and Exchange Board of India


    "The book explores the relationship between the domestic price of the share issued by an Indian firm and the price of its Depositary Receipt (DR). The role of differences in trading times and regulatory restrictions for deviations from the "Law of One Price" is explored by providing an analysis of data for selected Indian DRs. Related ideas of arbitrage arising from price discrepancies in the ADRs traded in the US and the listed stock in India are effectively used to elucidate one of the key investment principles. Historical developments of ADRs & GDRs and their relevance for developing countries like India and their role in the globalisation of financial markets make insightful reading. Overall, the book offers a concise, perceptive, and critical evaluation of one of the fundamental principles of finance."

    Sunil Poshakwale, Professor of International Finance, School of Management, Cranfield University, England