Dimensional Fund Advisors
Dimensional Fund Advisors
2012
Background, Principle and Strategy of DFA
Dimensional is a different kind of investment firm headquartered in Austin, Texas with regional offices in Amsterdam, Berlin, London, Santa Monica, Sydney, and Vancouver now (DFA 2012) which was founded in 1981 by David G. Booth and Rex Sinquefield, both graduates of the University Of Chicago Graduate School Of Business.
The underlying principle of DFA is that the stock market was “efficient” which is, on one could beat the market consistently except by luck during some periods. The founders also believed that academic research and the ability of skilled traders could contribute to a fund’s profits even when the investment was inherently passive.
At the first stage, DFA was aiming single investment fund that consisted with small stocks which fit its position in the market as a passive fund. The initial clients were major for tax-exempt institutions such as government, union pension funds and charities and etc. With the time going, DFA pursued individuals while through the intermediaries known as RIAs. Although with the low turnover, low transaction costs and diversification, DFA still could make reasonable profits by charging a moderate advising fee and developed rapidly.
DFA is an outstanding investment firm doing the investment based on precise academic research and strict trading strategy which will both be discussed later. Over the years, DFA have translated financial research into real world investment solutions (DFA 2012) such as Fama-French findings which enabled DFA benefit from “small” firm and “value” firm effects until the paper was published. The strict trading strategy of minimized the likelihood of buying “lemon” stocks enabled DFA to extract a discount on the stock purchase via the block trading which also created benefits for both DFA and its clients.
DFA and Fama-French findings
The original DFA’s fund is basically composed of small size firms based on the academic
2012
Background, Principle and Strategy of DFA
Dimensional is a different kind of investment firm headquartered in Austin, Texas with regional offices in Amsterdam, Berlin, London, Santa Monica, Sydney, and Vancouver now (DFA 2012) which was founded in 1981 by David G. Booth and Rex Sinquefield, both graduates of the University Of Chicago Graduate School Of Business.
The underlying principle of DFA is that the stock market was “efficient” which is, on one could beat the market consistently except by luck during some periods. The founders also believed that academic research and the ability of skilled traders could contribute to a fund’s profits even when the investment was inherently passive.
At the first stage, DFA was aiming single investment fund that consisted with small stocks which fit its position in the market as a passive fund. The initial clients were major for tax-exempt institutions such as government, union pension funds and charities and etc. With the time going, DFA pursued individuals while through the intermediaries known as RIAs. Although with the low turnover, low transaction costs and diversification, DFA still could make reasonable profits by charging a moderate advising fee and developed rapidly.
DFA is an outstanding investment firm doing the investment based on precise academic research and strict trading strategy which will both be discussed later. Over the years, DFA have translated financial research into real world investment solutions (DFA 2012) such as Fama-French findings which enabled DFA benefit from “small” firm and “value” firm effects until the paper was published. The strict trading strategy of minimized the likelihood of buying “lemon” stocks enabled DFA to extract a discount on the stock purchase via the block trading which also created benefits for both DFA and its clients.
DFA and Fama-French findings
The original DFA’s fund is basically composed of small size firms based on the academic