Dfa’s Strategies

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Case study one Introduction The purpose of this report is to analyse the performance of Dimensional Fund Advisors (DFA), which is one the successful financial institution around the world. We base on their strategies, features, and objective to understand them. Furthermore we analyse their principle of research and the reasons that made be a successful investment firm. Finally, we explored the newest products and future of them. DFA’s strategies Dimensional Fund Advisors (DFA) is an investment firm founded in 1981 and it based in Santa Monica, California, whose main business are small stock funds. Its business strategy is dedicated to the principles which the stock market is “efficient” (all publicly available information is reflected in stock price), the ability of skilled traders to contribute to a fund’s profits even when the investment was inherently passive, and the value of sound academic research. To applying these principles, DFA identified two trends which small stocks had consistently outperformed large stocks over the history of the stock market, and the stocks with a high book value of equity to market value of equity(BE/ME) exhibited consistently higher returns than stock with low BE/ME. Thus, DFA’s business strategy focused on creating funds that invested in small companies and companies with higher ratio of book value of equity to market value of equity. Under this strategy, DFA decided to pursue high-net –worth individuals, in addition to institutions, clients though registered investment advisors (RIAs). The DFA’s business strategy is good which is because the high profits and well growth. There are not all of DFA people believe in the principle of efficient market. This is because the weak-form of the efficient market hypothesis asserts that stock prices already reflect all information contained in the history of past prices. Additionally,

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