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Student
Title
Supervisor
Faculty
Educational Programme
Final Grade
Year of Graduation
Mariia Melnikova
Development of a Decision-making Algorithm Based on High-dividend Strategies for Private Investor
Economics
(Bachelor’s programme)
2018
The strategies of dividend yield are interesting by the phenomenon of excessive profitability in relation to the market, together with its simple application. In this paper, the relationship between dividend yield and stock returns is investigated on the example of developed and developing markets: Spain, Japan, India and Russia. To adequately assess the performance of the portfolio in the risk-return plane the Sharpe ratio, the Sortino ratio and the modified Sharpe ratio are adjusted. An assessment of the sensitivity of the yield of the simulated portfolios to market risk of the country is carried out using the CAPM and the Fama – French three-factor model. Moreover, to test the modified strategies of Dogs of the Dow, data on developed and developing markets are combined.

According to the results the hypothesis of high-dividend yield strategies’ outperformance in relation to the benchmark and low-dividend yield portfolio is confirmed on all markets for 13 years, except Russia, where the yield of low-dividend portfolio is higher than the yield of high-dividend portfolio. After adjusting for risk, all dividend portfolios also outperform the market portfolio and the low-yield portfolios in Russia, Spain and Japan. On all markets the measure of sensitivity of yield to market risk is detected, the assessment of alpha based on the CAPM model and the Fama - French three-factor model is positive for dividend portfolios in all four markets.

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