International Journal of Business and Social Science

ISSN 2219-1933 (Print), 2219-6021 (Online) DOI: 10.30845/ijbss


The Dogs of the Dow in China
Carol Wang, James E. Larsen, M. Fall Ainina, Marlena L. Akhbari, Nicolas Gressis

The unique institutional environment of China?s stock markets provides a rich setting to study the relationship between investors? behavior and market returns in the case of information inefficiency. This study extends the well documented Dogs of the Dow (Dow Dogs) strategy to China?s A share stock market. We find that Dow Dogs portfolios significantly outperform the market benchmark for the period of 1994 to 2009 in China?s markets. Further analysis indicates that (1) The fewer Dogs included in the portfolio, the greater the portfolio abnormal returns; (2) In general, the shorter holding period (in months), the greater the portfolio abnormal returns. These findings are robust even after adjusting for transaction costs and taxes. Our study contributes to the behavioral finance literature by providing new empirical evidence of the market anomaly.

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