1. What is DFA’s business strategy? What do you think of the firm? Are the DFA people really believe in efficient markets?
Dimensional Fund Advisors (DFA) primarily focuses on the investment of small stock funds. DFA’s business strategies are as following: * DFA was dedicated to the principle that the stock market was efficient. * DFA believes the value of sound academic research. * DFA believes the ability of skilled traders to contribute to a fund’s profits even when the investment was inherently passive. * DFA’s core competitiveness is its ability to get discount and reduce market affection when buying a big block of shares.
In our opinion, DFA is a very insightful company. Its …show more content…
DFA began as a small-stock fund in 1981, attempting to take advantage of the "size affect" (excess performance of small stocks) that had been discovered by a number of academic researchers. Most notably is the academic paper from the University of Chicago PH.D. dissertation of Rolf Banz, small stocks had consistently outperformed large stocks over the entire history of the stock market from 1926 through the late 1970s.
Later, research by Professors Eugene Fama and Kenneth French identified equity market exposure, capitalization, and price relative to fundamentals as the 3 factors that primarily determine the returns of a broadly diversified portfolio. Their work has held up through rigorous open review and Dimensional strategies focus on their insight. 3) Combination of Theory and Practice.
By acting as a conduit between financial economists and practicing investors, DFA has pioneered many strategies and consulting technologies now taken for granted in the industry. This makes for an exchange of ideas that allows Dimensional to position themselves at the forefront of innovative solutions.
The reason why DFA's RIA business has grown rapidly (see exhibit 2) was good evidence that DFA educated its RIAs by providing them with access to top researchers who were developing innovative theories and empirical analyses. The RIAs then used what