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Keywords:

  • Dow Dogs;
  • market efficiency;
  • value effect;
  • anomaly
  • G14

Abstract

The “Dogs of the Dow” (or “Dow Dog”) investment strategy, is a popular investment approach that promises huge abnormal returns for investors in the ten top yielding stocks from the Dow Jones Industrial Average (DJIA). However, periods of evident outperformance are balanced by periods of conspicuous underperformance. When strategy returns are adjusted for taxes and rebalancing costs, Dow Dogs perform in line with the DJIA over the 1961–1998 period. As a result, there is no robust evidence of an average return anomaly tied to Dow Dogs.