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Pepperdine Graziadio Faculty Address Efficiency of the Dow Jones Industrial Average Even Weak-Form Market in Research Paper Published in The Journal of Accounting and Finance

July 8, 2021  | 1 min read

Many investment strategies have attempted to achieve extraordinary profits, but how many of them yield profitable results? In the research paper, Is the Dow Jones Industrial Average Even Weak-Form Market Efficient?, by Michael Kinsman, Clemens Kowanatzi, James DiLellio, and Darrol Stanley, they explore the weak-form of the Efficient Market Hypothesis (EMH) on the Dow Jones Industrial Average (DJIA) component stocks through mechanical trading strategies.

The Information Age has allowed investor transactions to occur almost instantaneously, and the DJIA has become a globally recognized barometer of financial markets. The EMH, in its weak-form, postulates that future returns cannot be predicted by strategies involving mechanical and technical trading rules. Many investment strategies have been used to achieve extraordinary profits with one such strategy consisting of holding the highest yielding DJIA stocks for a period of one year in an attempt to outperform both the DJIA and S&P 500 Indices. The study presented explores the possibility of further anomalies using technical methods of stock selection on the DJIA as the sole investment vehicle. Results clearly show that the Dow Jones Industrial Average is weak-form efficient. 

The full research paper is available in The Journal of Accounting and Finance.