Dimensional Fund Advisors

In: Business and Management

Submitted By Harras1804
Words 1917
Pages 8
Executive Summary
The purpose of this report is to evaluate the relevance and accuracy of the theories used by DFA, especially the value premium and the size premium where almost all of their funds are based upon. The company used for this report is Dimensional Fund Advisors, which is an investment fund company. The source of information that is used is from websites and some journals. The main finding in this report is that DFA focusing their investment in small cap stock, as small stock tends to outperform large stock. To conclude, this report will provide evidence on the usefulness of these theories to increase return of DFA’s funds as well as recommendations about changes in strategy that will enhance the performance of DFA overall.

Introduction
Dimensional Fund Advisors is an investment company that uses its strategy based on academic research as well as related theories. It is based in Santa Monica, California and founded in 1981 by Booth and Rex Sinquefield. They work together with advocate of the efficient market hypothesis, indicating a relatively strong belief in this theory and thus in efficient markets. DFA believe that skilled traders have the capability to pitch in to the fund’s profits, although the investments are inherently passive. Additionally, they also adjust their strategy to new findings in the field. This report will discuss the next step that DFA should implement in order to perform better compared to the other managed funds.

DFA’s Business Strategy
DFA’s business strategy is based on the core concept that markets are “efficient” which means that no one has the ability to regularly pick stocks and beat the market. In addition, founders of DFA believed that amalgamating solid academic research with abilities of skilled traders would produce superior returns. DFA primary business is investing in the small stock funds, as based on the…...

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