The 'Dogs of the Dow' strategy revisited: Finnish evidence

    Authors

    E. Rinne;S. Vahamaa

    Comments

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    Abbreviated Journal Title

    Eur. J. Financ.

    Keywords

    Dogs of the Dow strategy; investment strategy; portfolio management; STOCK-MARKET; RETURNS; RISK; Business, Finance

    Abstract

    This paper re-examines the performance of the 'Dogs of the Dow' (DoD) investment strategy in a different market setting and over a different time period. In particular, we use Finnish data over the period 1988-2008 to examine whether the DoD strategy can be successfully replicated in different types of markets and in different market conditions. Our empirical findings suggest that the DoD investment strategy is profitable in the Finnish stock market. The DoD strategy outperforms the market index with an average (median) annual abnormal return of 4.5% (7.5%). The outperformance of the DoD strategy appears particularly pronounced in stock market downturns. Furthermore, our results indicate that the DoD strategy outperforms the market index even after most risk adjustments and thereby suggest that the outperformance of the strategy is not merely a compensation for higher risk. Nevertheless, we also document that the superior returns of the DoD strategy may be largely attributed to the winner-loser effect.

    Journal Title

    European Journal of Finance

    Volume

    17

    Issue/Number

    5-6

    Publication Date

    1-1-2011

    Document Type

    Article

    Language

    English

    First Page

    451

    Last Page

    469

    WOS Identifier

    WOS:000290675300008

    ISSN

    1351-847X

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