Dimensional Fund Advisors Essay

This case uses DFA as a setting to introduce you to the latest research in academic finance, as well as to show you how you can turn new findings into productive investment strategies. This case pays particular solicitude to the cornerstones of the DFA approach the size effect and the value-growth effect. To this end, the case presents detailed information on recent research in capital markets (particularly the stock market), as well as on DFAs history and operations. The case also explores the effect of recent research innovations on the firm, and considers DFAs new (as of 2002) product tax-managed passive funds. Start by reading cargonfully the Case Study HBS 9-203-026, Dimensional Fund Advisors. Next, prepare a comprehensive report on this case, covering the questions suggested below, as well as other issues that you might find pertinent.1. What is DFAs business strategy? What do you think of the firm? Are the DFA people really believers in efficient markets? How does DFA atten tion deficit disorder value for investors? What are the pros and cons of the passive approach?2. What are the Fama-French findings? Do they make sense? Should we persuade small stocks to outperform large stocks in the future? And, should we expect value stocks to outperform growth stocks? What did Fama and French discover about the CAPM and beta? How do you reconcile the empirical findings with the CAPM theory?3. Discuss DFAs trading strategy. How does it work, and what are the costs and benefits? Can DFA keep the competitive advantage in the future? Why dont competitors emulate DFAs approach? 4. What are DFAs products? How does DFAs new tax-managed strategies work? Is the tax-managed fund family likely to be successful on a broad scale, or is it just for a small boxmarket? What is the expected gain from DFAs tax management strategy, and what is the increase in volatility that results from it?5. What should be the firms strategy going antecedent? Does the company need to modify i ts basic strategy if it wants to grow assets and/or profits?Enjoy the team work