To raise money in more than one market, some corporations use global depositary receipts (GDRs) to sell their stock on markets in countries other than the one where they have their headquarters.
The GDRs are issued in the currency of the country where the stock is trading. For example, a Mexican company might offer GDRs priced in pounds in London and in yen in Tokyo.
Individual investors in the countries where the GDRs are issued buy them to diversify into international markets. GDRs let you do this without having to deal with currency conversion and other complications of overseas investing.
However, since GDRs are frequently offered by newer or less-known companies, the prices are often volatile and the stocks may be thinly traded. That makes buying GDRs riskier than buying domestic stocks.
- Browse Related Terms: Brady bond, Central bank, Depository Trust and Clearing Corporation (DTCC), Devaluation, Euro, Eurobond, Eurocurrency, Exchange Rate, Floating rate, Global depositary receipt (GDR), International Monetary Fund (IMF), Monetary policy, Monetary reserve, Open market, World Bank, Yankee bond