International Journal of Academic Research in Business and Social Sciences

search-icon

Contrarian Strategies in Developing Asian Countries: Dogs of the Dow Theory (DoD) versus Puppies of the Dow Theory (PoD)

Open access
This paper tries to test the ability of Dogs of the Dow Theory (DoD) and Puppies of the Dow Theory (PoD) to outperform the market returns of the four developing Asian countries from 2000 until 2014. Although empirical findings indicate that these two strategies appear to outperform the individual markets respectively however the results of the t-test do not show them to be statistically significant. This paper further tests the capability of these trading strategies in beating the market return during economic crisis of 2002, 2008 and 2011. Empirical results across these developing Asian countries revealed that in long run, both DoD and PoD portfolios are still applicable despite of mixed performance throughout the economic crisis period. DoD and PoD trading strategies are able to beat the market returns in Malaysia and Thailand during those crises but not in the Chinese share market. In the case of the Indonesian share market, these two strategies outperform the market only during the year 2002 and 2008 crises. Results of the t-test between the abnormal returns of the two strategies appear to be insignificant. This implies that the effectiveness of two strategies remain inconclusive.
Bursa Malaysia: Annual Report 2015. Retrieved October 5, 2016, from http://bursa.listedcompany.com/misc/ar2015.pdf
Cai, R. (2014). Which one is better: Investing in high dividend or low dividend stocks? Unpublished master thesis, University of Nevada, Reno, United States.
Cook, H. (2014). Which company pays the best dividends? Morningstar. Retrieved December 18, 2014, from http://www.morningstar.co.uk/
Ekaputra, A., & Sukarno, S. (2012). The application of dividend yield based investment strategy in Indonesia stock exchange. The Indonesian Journal of Business Administration, 1(1), 18-22.
Friso, D. (2016). Do retail investors benefit from a high dividend yield?: The dogs of the dow strategy applied on the Swedish stock market. Unpublished master thesis, Jonkoping University, Sweden.
Heidmann, S. (2011). Can the “puppies of the Euro Stoxx” beat the European market? Unpublished bachelor thesis, Lunds Universitet, Sweden.
Hoh, A. K. K., Wei, H. C., Chun, L. Y., Hou, N. K., & Shun, T. X. (2011). Portfolio diversification in Malaysian stock market. Unpublished bachelor project, Universiti Tunku Abdul Rahman, Malaysia.
Huang, C. S., You, C. F., Huang, J. C., & Kuo, S. W. (2014). The practice of dividend-yield strategies in the greater China region. Asian Economic and Financial Review, 4(11), 1607-1621.
Kim, J. H., Doucouliagos, H., & Stanley, T. D. (2014). Market Efficiency in Asian and Australasian stock markets: A fresh look at the evidence. SSRN. Retrieved April 27, 2015, from http://papers.ssrn.com/
Maheshwari, S., & Dhankar, R. S. (2014). A critique of overreaction effect in the global stock markets over the past three decades. Journal of Business and Management, 16(4), 25-32.
McQueen, G., Shields, K., & Thorley, S. R. (1997). Does the 'dow-10 investment strategy' beat the dow statistically and economically. Financial Analysts Journal, 53(4), 66-72.
Milinov, V., & Pavlov, T. (2016). Opportunities to improve the portfolio performance based on dividend strategies and equity home bias. Narodnostopanski Arhiv Journal, 2, 30-49.
Necander, A., & Olsson, D. (2016). Beating the market through dividend yields: Dogs of the dow in the Swedish context. Unpublished master thesis, Uppsala University, Sweden.
O’Higgins, M. B., & Downes, J. (2000). Beating the dow. New York: HarperCollins.
Pandey, N. N. (2017). 'Dogs of the dow' investment strategy: Indian context. SCMS Journal of Indian Management, 14(2), 20-27.
Prather, L. J., Topuz, J. C., & Uzmanoglu, C. (2011). Dividend-yield based trading rules: The Turkish evidence. International Research Journal of Applied Finance, 2(11), 1286-1302.
Qiu, M. (2014). A study on prediction of stock market index and portfolio selection. Unpublished doctoral dissertation, Fukuoka Institute of Technology, Japan.
Qiu. M., Yan, H., & Song, Y. (2012). Empirical analyses of the "dogs of the dow" strategy: Hong Kong evidence. European Journal of Management, 12(3), 183-187.
Sahu, C. (2001). Effectiveness of 'dogs of the dow' investment strategy in the Indian context. Vikalpa, 26(1), 65-71.
Safari, M. (2009). Dividend yield and stock return in different economic environment: Evidence from Malaysia. Munich Personal RePEc Archive (MPRA). Retrieved January 22, 2014, from http://mpra.ub.unimuenchen.de/23841/1/MPRA_paper_23841.pdf
Shi, H. L., Jiang, Z. Q., & Zhou, W. X. (2015). Profitability of contrarian strategies in the Chinese stock market. PloS one, 10(9), e0137892.
Tissayakorn, K., Song, Y., Qiu, M., & Akagi, F. (2013). A study on effectiveness of the “dogs of the dow” strategy for the Thai stock investment. International Journal of Innovation, Management and Technology, 4(2), 277-280.
U.S. Department of State: Country Reports on Terrorism 2011, 2012. Retrieved October 5, 2017, from https://www.state.gov/j/ct/rls/crt/2011/195542.htm.
Wang, C., Larsen, J. E., Ainina, M. F., Akhbari, M. L., & Gressis, N. (2011). The dogs of the dow in China. International Journal of Business and Social Science
In-Text Citation: (Ghouse, Ahmad, & Salamudin, 2018)
To Cite this Article: Ghouse, S. H. N. M., Ahmad, N., & Salamudin, N. (2018). Contrarian Strategies in Developing Asian Countries: Dogs of the Dow Theory (DoD) versus Puppies of the Dow Theory (PoD). International Journal of Academic Research in Business and Social Sciences, 8(12), 2003–2012.