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Do 'Dogs of the World' Bark or Bite? Evidence From Single-Country ETFs

20 Pages Posted: 15 Jun 2013 Last revised: 10 Apr 2014

David M. Smith

State University of New York at Albany - School of Business

Vladimir S. Pantilei

SUNY at Albany - School of Business

Date Written: September 9, 2013

Abstract

Mean reversion in financial markets is commonly accepted as a powerful force. This paper examines the performance of a simple mean-reversion-based strategy -- Dogs of the World -- designed to take advantage of return reversals in national equity markets. Both a simulated application of the strategy using indexes since 1971 and application using single-country ETFs since 1997 produces higher compounded average returns than those of a comparable market index. Although the Dogs strategy also produces higher volatility than the index, the information ratio for the strategy suggests that the return more than compensates. An advantage of this strategy is that its implementation using single-country ETFs is straightforward and inexpensive.

Suggested Citation

Smith, David M. and Pantilei, Vladimir S., Do 'Dogs of the World' Bark or Bite? Evidence From Single-Country ETFs (September 9, 2013). Journal of Investing, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2279246 or http://dx.doi.org/10.2139/ssrn.2279246

David McNeil Smith (Contact Author)

State University of New York at Albany - School of Business ( email )

1400 Washington Ave.
Albany, NY 12222
United States

HOME PAGE: http://www.albany.edu/ciim

Vladimir S. Pantilei

SUNY at Albany - School of Business ( email )

1400 Washington Ave.
Albany, NY 12222
United States

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