Do Dow Stocks Offer a Value Premium?

Abstract

This article investigates the performance of value and growth portfolios based on five different valuation ratios to determine whether Dow stocks offer a value premium, as suggested by the Dogs of the Dow strategy. The results show that the dividends value portfolio earned significant excess returns during May 1983–April 1995, while the earnings value portfolio significantly outperformed during May 1995–April 2007. Only the earnings value portfolio provided a significant annual excess return (3.72%) over the entire study period.