Modeling Principles of Formation of Portfolios of Dividend on the Russian Stock Market

This paper is dedicated to the testing of the classical version of the Dogs of the Dow strategy, invented in 1991 by the American economist Michael O’Higgins. This strategy became extremely popular during the following twenty years, although there is the lack of studies on this strategy on the Russian stock market. Moreover, the fundamental idea of this research is to examine the efficiency of the traditional version of the Dogs of the Dow strategy and then modify it by adding two filters (financial indicators of the company – ROA coefficient and P/E multiple). Furthermore, the aim is to investigate whether this new strategy could provide higher returns and outperform the market index MICEX during the period of time from 2007 to 2016. During the process of testing the efficiency of the modified DoDs strategy, two optional parameters would be added into the initial model. The number of stocks and the month of the portfolio rebalancing would act as variables and would be optimized in the course of this research. At the next stage of the investigation, the efficiency of the modified version of the Dogs of the Dow strategy would be tested with the application of Sharpe ratio, Sortino ratio, VaR coefficient and t-statistics. At the final stage of the research, the regression analysis would be used in order to test all the achieved results.