Can Alternative Dogs of the Dow Beat Hedge Funds?

Abstract

Previous studies have shown the consistent and significant positive return differentials between high-ranked and low-ranked stocks using reversal, value, momentum, beta, growth and contrarian policies. This research serves as an extension of these studies and empirically assesses the performance of these six policies and the optimal portfolio of these policies with an investment universe of DJIA stocks only from 1993 to 2013. With the objective of outperforming the long-short equity hedge fund benchmark, we are able to find policies and/or optimal portfolios that track and outperform hedge funds using in-sample and out-of-sample testing.