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3/18/2013

Business and Economics

Objectives of this case

This is an important case and promotes an understanding of several key topics in finance.  1. The case introduces many of the major empirical findings produced during the last three decades and allows students to debate concepts such as market efficiency and the validity of models such as the CAPM and multifactor models.  2. Does the market efficiently reward risk or whether performance differences constitute a historical fluke.  3. Practicalities of creating an investment product and managing it effectively.

Case Motivation for week 4:

Dimensional Funds Advisors, 2002.

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Objectives of this case

 4. Examines DFA’s trading techniques which have produced superior returns. How does DFA handle adverse selection?  5. Analyse new investment products and understand fund taxation.

Required knowledge

– Market Efficiency – Portfolio Theory – Trading Strategies – Asset Pricing Models

AFF5300 Case Studies in Finance

3

1

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Questions to be addressed in report submission

 1. What is DFA’s business strategy? What do you think of the firm? Are the DFA people believers in efficient markets?  2. Does the Fama-French findings make sense? Should we expect small stocks to outperform large stocks in the future? Value stocks to outperform growth stocks?  3. Why has DFA’s small stock fund performed so well?  4. Is DFA’s tax managed fund family likely to be successful or remain just a small niche market?  5. What should be the firm’s strategy going forward?

DFA THINKERS – EUGENE F. FAMA

 http://www.dfaus.com/2009/12/dimensional-thinkers-eugene-f-fama.html

AFF5300 Case Studies in Finance

6

Submission (Case: Dimensional Funds Advisors, 2002)

 You may work in groups but document and submit individually: – Penalties will apply if we spot collusion – Groups must be registered with teaching associate (Libby)  You must document: – The assumptions you have made if any...