This study examines the performance of dividend yield investment strategies in the Vietnam stock market over the period from 2003 to 2012. One of the most well-known strategies is commonly referred to as ‘Dogs of the Dow’ strategy (DoD), which involves investing equal amounts in the 10 highest-yielding stocks of a market index. In addition to the standard DoD-10, the performance of the DoD-5 version is also investigated. The performance of the strategies is analyzed on an absolute and risk adjusted bases. Beside Sharpe ratio and Treynor index, the market-adjusted model and ‘Modigliani-squared’-adjusted model are used to measure the abnormal return of the investment strategies.
Furthermore, the transaction costs and taxes payment are taken into account to test the economic significance of the strategies. Finally, the size effect and book value effect are examined to find explanations for the DoD phenomenon.
The empirical findings suggest that the all of the investigated DoD strategies strongly outperform the market index. In particular, the average annual abnormal return of the DoD-10 is 15.3%, whereas, the corresponding return of the DoD-5 strategy is 29.7%. Although the abnormal returns after taxes and transaction costs are positive, they are albeit statistically insignificant. These findings indicate that the DoD investment strategy may not be economically significant. Finally, this study provides evidence to support that the DoD phenomenon is not caused by the value effect. The finding seems to be consistent with many previous studies. Conversely, the DoD phenomenon can probably be explained with the size effect.fi=Opinnäytetyö kokotekstinä PDF-muodossa.|en=Thesis fulltext in PDF format.|sv=Lärdomsprov tillgängligt som fulltext i PDF-format
