The rise and fall of the “Dogs of the Dow”

Domian, Dale L.; Louton, David A.; Mossman, Charles E.

doi:10.1016/s1057-0810(99)00007-4

Cited by 19 publications

(7 citation statements)

References 21 publications

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“…Rather, investing equal amounts across the 30 index firms and holding for the long term is more likely to outperform the Dow index (price weighted) by almost 1% each year. This is in line with the findings of Domian et al (1998). Hence, investing in funds such as the Exchange Traded Funds (ETF) that invest equal amounts across the Dow firms will be a better investment than those that simply follow the market index of the DJIA.…”

Section: Discussionsupporting

confidence: 83%

The Dogs of the Dow Theory – Is It Valid?

Kim¹

2019

IJEF

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The Dogs of the Dow theory has been a popular tool in the financial market. But while the theory is simple, there have been mixed findings on its validity. Using U.S. data from 2000 through 2017, this paper identifies how consistently an investment strategy that follows the Dogs of the Dow theory outperforms the average market. The results show that the theory has not worked well in the recent U.S. market when trading costs and taxes are included. Rather, holding an equally weighted investment of all firms is more likely to outperform the Dow Jones Industrial Average index and the Dogs of the Dow strategy in the long term.

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Section: Discussionsupporting

confidence: 83%

The Dogs of the Dow Theory – Is It Valid?

Kim¹

2019

IJEF

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“…However, there is no robust consensus on the validity of the theory in the market. Some have found the theory to be well confirmed (Chong & Luk, 2010;Tissayakorn et al, 2013;Soomro & Haroon, 2015;Yan et al, 2015), whereas other studies contradict the theory (Domian et al, 1998;Hirschey, 2000;Da Silva, 2001;Kim, 2019). Yan et al (2015) supported the validity of DoD theory by demonstrating higher returns upon following this strategy than the average market return in Taiwan.…”

Section: Introductionmentioning

confidence: 93%

Does the Dogs of the Dow Theory Work at the Sectoral Level?

Kim¹,

Nguyen²,

Arbet³

2020

IJEF

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One of popular theories in technical analysis is the Dogs of the Dow (DoD) theory. According to this strategy, the average market can be outperformed using 30 firms of Dow Jones Industrial Average (DJIA) index. Since DoD was introduced, there have been numerous studies on the validity of the theory. However, only contradicting results have been found, so the research has produced no robust consensus on the theory. In addition, most of the research was performed using aggregate stock market data. The purpose of our research is to determine whether the DoD theory is valid at the sectoral level. We find that returns of top 5 highest dividend-yield firms are higher than average return of each sector. However, the additional returns of those 5 firms are not meaningful enough if we take into account tax on profits and trading costs, which does not validate the DoD theory at the sectoral level.

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“…McQueen, Shields and Thorley [9] find results supporting DOD; however, the superior performance of the strategy was not economically significant after adjusting for portfolio risk, taxes and transactions costs. Domian, Louton and Mossman [10] and Hirschey [11] contend that the performance of the Dogs varies depending on the subperiods under investigation and whether the subperiods were prior to or after the stock market crash of 1987.…”

Section: Relevant Literaturementioning

confidence: 99%

Investment Performance of the "Dogs of the Dow” Strategies: Latest Evidence

Lin¹

2017

IJTEF

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Abstract-The purpose of this research is to examine the risk-adjusted investment performance of three versions of the 'Dogs of the Dow' or 'DOD' strategies, relative to that of the broader Dow Jones Industrial Average (DJIA). Specifically, the research explores the traditional DOD portfolio (Dow-10), the Dow-5 and the 'Small Dogs of the Dow' (Small Dogs). An empirical analysis utilizing the Sharpe ratio is used to investigate the relative investment performance of the DOD variants. Over the period 1996-2016, the three DOD portfolios outperform the DJIA, in terms of, raw annual returns, total sample period returns, risk-adjusted annual returns, risk-adjusted rolling period returns and Sharpe ratios. The study concludes that the DOD strategies provide superior risk-adjusted returns than the DJIA Index and that the dividend-driven/contrarian methods may deliver enhanced returns, compared with the buy-and-hold of Dow-30 Index.Index Terms-Dividend investing, dogs of the dow, investment performance, sharpe ratio.

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The rise and fall of the “Dogs of the Dow”

Cited by 19 publications

References 21 publications

The Dogs of the Dow Theory – Is It Valid?

The Dogs of the Dow Theory – Is It Valid?

Does the Dogs of the Dow Theory Work at the Sectoral Level?

Investment Performance of the "Dogs of the Dow” Strategies: Latest Evidence

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