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Analyzing the efficiency of the Dogs of the Dow strategy in the Russian stock market for the period from 2005 through 2018

Vol. 25, Iss. 7, JULY 2019

Received: 21 May 2019

Received in revised form: 12 June 2019

Accepted: 26 June 2019

Available online: 1 August 2019

Subject Heading: Securities market

JEL Classification: G11

Pages: 16631679

https://doi.org/10.24891/fc.25.7.1663

Nikolashina N.N. Plekhanov Russian University of Economics (PRUE), Moscow, Russian Federation
nnn478@mail.ru

https://orcid.org/0000-0001-9279-2188

Subject The research investigates the Dog of the Dow strategy implying the formation of a portfolio of stocks yielding high dividends.
Objectives The study evaluates the efficiency of the Dog of the Dow strategy with respect to the Russian stock market for the period from 2005 through 2018.
Methods The methodological framework includes methods of statistical and comparative analysis.
Results I formed classical and modified portfolios as per the Dog of the Dow strategy. The article compares the return on such portfolios and the return on the market index, considering the capitalization of dividends and omitting them. The Dog of the Dow strategy was evaluated also through the risk to return test measured with the Sharpe ratio.
Conclusions and Relevance The Dog of the Dow strategy was found to be more efficient in comparison with investment in the index portfolio in terms of return and risk to return test. My conclusions are valid with or without the capitalization of dividends. Based on the Russian stock market data, the investment strategy is proved to be efficient, implying the formation of a portfolio of stocks yielding the highest dividends. The findings can be relevant to would-be investors when forming their portfolio of securities.

Keywords: Dogs of the Dow strategy, high dividend yielding stock, stock portfolio management

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