Glossary

An American Depository Receipt (ADR) is a negotiable financial instrument that represents ownership in a specified number of shares of a foreign company's stock. 🌐

ADRs are traded on US stock exchanges, allowing US investors to invest in foreign companies without having to buy shares directly on a foreign stock exchange. They are created by US banks that hold the underlying foreign shares and issue corresponding ADRs.

For example, a US investor interested in owning shares of a European company could buy ADRs of that company on a US stock exchange instead of purchasing the shares directly on a European exchange.

Fun fact: ADRs were introduced in the 1920s to help US investors overcome the challenges of investing in foreign markets, such as currency conversion, language barriers, and differing settlement practices. 🏦 Today, ADRs make it easier for investors to diversify their portfolios with international exposure.