Assignment: Cases In Financial Decision-Marking
Case Study: Dimensional Fund Advisors, 2002
Suggested Assignment Questions
1. What are the philosophical beliefs of Dimension Fund Advisors (DFA)? What type of products does DFA offer? How does DFA add value for its investors?
2. How is DFA's business model related to the research of FAMA and French? Why do you think small-cap stocks outperformed large-cap stocks historically? That is, do the better returns of small-cap stocks reflect the compensation for extra risk or the correction in mispricing? In other words, do you think small-cap stocks are riskier than large-cap stocks? Or small-cap stocks are undervalued relative to large-cap stocks and such mispricing is corrected as time elapses? Do you expect this pattern to continue?
3. Similarly, why do you think value stocks outperformed growth stocks historically? That is, do The better returns of value stocks reflect risk compensation or corrected mispricing? Do you Expect this pattern to continue?
4. Why does DFA care so much about trading? What rules does the firm adopt for its trading practice? Do you think DFA can maintain its competitive advantage in trading in the future?
5. How does DFA's new tax-management business work? What are the costs and the benefits? Is the tax-managed fund business likely to be successful on a broad scale?
6. How should DFA manage its strategy going forward? To continue its success, do you think DFA should make any changes? If so, can you suggest any directions? If not, why?
Format your assignment according to the following formatting requirements:
1. The answer should be typed, double spaced, using Times New Roman font (size 12), with one-inch margins on all sides.
2. The response also include a cover page containing the title of the assignment, the student's name, the course title, and the date. The cover page is not included in the required page length.
3. Also Include a reference page. The Citations and references should follow APA format. The reference page is not included in the required page length.