“We are pleased to introduce DOGS, the first packaged mean reversion strategy with an international focus, giving investors the opportunity to have exposure to an investment strategy that taps into deeply undervalued countries,” Barrato added.
The Dogs of the World ETF will try to exploit the mean reversion anomaly where price and returns eventually move back to the mean or average.
“The mean reversion anomaly is one of the oldest anomalies described by academia. It was originally discovered between stocks in one country, but subsequent academic studies have shown it also works on broad country market exposure, and its performance shows strong consistency. One fundamental reason to explain the mean reversion anomalies across countries is insufficient cross-border equity flows due to investors’ fears of capital controls. Another explanation is behavioral biases in investors’ behavior,” according to Arrow Funds.
In contrast, DWCR is comprised of developed and emerging country stocks exhibiting relatively strong momentum characteristics, so the country rotation strategy would buy when relative strength is established and sell after any signs of weakness.
For more information on new fund products, visit our new ETFs category.