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

Authors

  • Dale L. Domian College of Commerce, University of Saskatchewan, Saskatoon, Saskatchewan, S7N 0W0, CANADA
  • David A. Louton Department of Finance, Bryant College, 1150 Douglas Pike, Smithfield, RI 02917-1284, USA
  • Charles E. Mossman Faculty of Management, University of Manitoba, Winnipeg, Manitoba, R3T 2N2, CANADA

DOI:

https://doi.org/10.1016/S1057-0810(99)00007-4

Abstract

The Dow Dividend Strategy recommends the highest-yielding stocks from the 30 Dow Industrials. These stocks have come to be known as the “Dogs of the Dow” since they often include some of the previous year’s worst performers. While the strategy’s successes—and more recently, its failures—have been well documented in the popular press, there have not been any convincing explanations of why the strategy worked. This paper demonstrates that the behavior of these stocks is consistent with the market overreaction hypothesis. In years before the stock market crash of 1987, the dogs were indeed “losers” which went on to become “winners.” But in the post-crash period, the high-yield stocks actually outperformed the market during the previous year. The Dow Dividend Strategy is no longer selecting the true dogs. © 1998 Elsevier Science Inc. All rights reserved.

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Published

1998-09-30

How to Cite

Domian, D. L., Louton, D. A., & Mossman, C. E. (1998). The rise and fall of the “Dogs of the Dow”. Financial Services Review, 7(3), 145–159. https://doi.org/10.1016/S1057-0810(99)00007-4

Issue

Vol. 7 No. 3 (1998): Financial Services Review

Section

New Original Submission

License

Copyright (c) 1998 JAI Press Inc.

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