The 'Dogs of the Dow' Strategy Revisited: Finnish Evidence

European Journal of Finance, Vol. 17, Issue 5-6, pp. 451-469, 2011

Posted: 16 Jan 2011 Last revised: 31 May 2011

See all articles by Eemeli Rinne

Eemeli Rinne

ICECAPITAL Securities Ltd

Sami Vähämaa

University of Vaasa

Date Written: October 18, 2010

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.

Keywords: Dogs of the Dow strategy, investment strategy, portfolio management

JEL Classification: G0, G11, G15

Suggested Citation

Rinne, Eemeli and Vähämaa, Sami, The 'Dogs of the Dow' Strategy Revisited: Finnish Evidence (October 18, 2010). European Journal of Finance, Vol. 17, Issue 5-6, pp. 451-469, 2011. Available at SSRN: https://ssrn.com/abstract=1740655

Eemeli Rinne

ICECAPITAL Securities Ltd ( email )

Keskuskatu 1 A
Helsinki, FI-00100
Finland

Sami Vähämaa (Contact Author)

University of Vaasa ( email )

P.O. Box 700
Vaasa, FI-65101
Finland
+358 29 449 8455 (Phone)

HOME PAGE: http://www.uva.fi/~sami

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