Does the 'Dogs of the Dow' strategy work better in blue chips?

The 'Dogs of the Dow' strategy is a dividend-yield trading strategy, which invests in stocks that give the highest dividend. This article examines whether the 'Dogs of the Dow' strategy is profitable in the Hong Kong stock market. Using the data from 1992 to 2007, we show that a portfolio consisting of the top dividend-yielding stocks generates a negative return for investors, whereas a portfolio with top dividend-yielding Hang Seng Index constituent stocks can fetch a positive return of about 8% per year. The result is in agreement with that of McQueen et al. ( 1997 ).