Dimensional Fund Advisors, 2002
Investments Analysis and Management
Group 5: Dimensional Fund Advisors, 2002
DFA Overview
Dimensional Fund Advisors (DFA) is an investment firm founded in 1981 by David G. Booth and Rex Sinquefield, both graduates of the University of Chicago Graduate School of Business.
The firm has three Nobel Laureates sitting on its board: namely Myron Scholes, Robert C. Merton, and the late Merton Miller. Other directors include leading economists such as Eugene Fama and Kenneth French; they jointly created famous “Fama-French Three-Factor Model”.
DFA has more than $230.9 billion of asset under management (AUM), as of 30 June 2011, rising from slightly over $35 billion in 2002. Its mutual funds are not offered to individual investors, but only to institutional investors and approved fee-only Registered Investment Advisors (RIA).
Principle of DFA’s investment philosophy - Efficient markets
DFA was founded on the premise on efficient market hypothesis (EMH) and that no one could consistently outperform the market. This passive approach to investments is contradictory to Wall Street where the belief is that through expert stock selection, one can out-maneuver the market.
Since DFA believed that markets were efficient, their fees were lower than most actively managed funds but higher than pure index funds since they were positioned as a passive fund that claimed to add value. As such, they employed a combination of passive investments but active trading.
There are three major premises surrounding the efficient market hypothesis: "weak", "semi-strong", and "strong". Weak EMH claims that prices on traded assets (e.g., stocks, bonds, or property) already reflect all past publicly available information. Semi-strong EMH claims both that prices reflect all publicly available information and that prices instantly change to reflect new public information. Strong EMH additionally claims that prices instantly reflect even hidden or "insider" information. There is
Group 5: Dimensional Fund Advisors, 2002
DFA Overview
Dimensional Fund Advisors (DFA) is an investment firm founded in 1981 by David G. Booth and Rex Sinquefield, both graduates of the University of Chicago Graduate School of Business.
The firm has three Nobel Laureates sitting on its board: namely Myron Scholes, Robert C. Merton, and the late Merton Miller. Other directors include leading economists such as Eugene Fama and Kenneth French; they jointly created famous “Fama-French Three-Factor Model”.
DFA has more than $230.9 billion of asset under management (AUM), as of 30 June 2011, rising from slightly over $35 billion in 2002. Its mutual funds are not offered to individual investors, but only to institutional investors and approved fee-only Registered Investment Advisors (RIA).
Principle of DFA’s investment philosophy - Efficient markets
DFA was founded on the premise on efficient market hypothesis (EMH) and that no one could consistently outperform the market. This passive approach to investments is contradictory to Wall Street where the belief is that through expert stock selection, one can out-maneuver the market.
Since DFA believed that markets were efficient, their fees were lower than most actively managed funds but higher than pure index funds since they were positioned as a passive fund that claimed to add value. As such, they employed a combination of passive investments but active trading.
There are three major premises surrounding the efficient market hypothesis: "weak", "semi-strong", and "strong". Weak EMH claims that prices on traded assets (e.g., stocks, bonds, or property) already reflect all past publicly available information. Semi-strong EMH claims both that prices reflect all publicly available information and that prices instantly change to reflect new public information. Strong EMH additionally claims that prices instantly reflect even hidden or "insider" information. There is