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The Dogs of the Dow Theory ¨C Is It Valid?

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  • Doh-Khul Kim

Abstract

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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  • Doh-Khul Kim, 2019. "The Dogs of the Dow Theory ¨C Is It Valid?," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 11(5), pages 1-43, May.
    • Handle: RePEc:ibn:ijefaa:v:11:y:2019:i:5:p:43
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    References listed on IDEAS

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    2. Domian, Dale L. & Louton, David A. & Mossman, Charles E., 1998. "The rise and fall of the "Dogs of the Dow"," Financial Services Review, Elsevier, vol. 7(3), pages 145-159.
    3. Da Silva, Andre L. C., 2001. "Empirical tests of the Dogs of the Dow strategy in Latin American stock markets," International Review of Financial Analysis, Elsevier, vol. 10(2), pages 187-199.
    4. Terence Tai-Leung Chong & Kin Keung Luk, 2010. "Does the 'Dogs of the Dow' strategy work better in blue chips?," Applied Economics Letters, Taylor & Francis Journals, vol. 17(12), pages 1173-1175.
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    More about this item

    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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