The ‘Dogs of the Dow’ strategy revisited: Finnish evidence

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.