Sweeping Changes Underway at DFA

“Despite it’s success, the firm is tinkering with the way it builds equity portfolios” By Jason Kephart via Investment News

For the first time in more than 20 years, Dimensional Fund Advisors is changing the way it builds equity portfolios. Thanks to a breakthrough in asset-pricing research last year, DFA is adding a third layer of screening to its equity portfolios, which already tilt toward small and value stocks. The new layer, or dimension, focuses on a company’s persistence of profitability — basically a stock’s ability to earn a profit consistently.

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The Profitability Factor

Phil DeMuth discusses a possible breakthrough for factor-based investors known as “Profitability”. “Over time, tilts towards value, momentum and profitability have outperformed the market, and due to the diversification benefits, a combined portfolio of these three has provided much higher reward per unit of risk and a significant reduction in extreme risk or losses. Thus, Read more about The Profitability Factor[…]

The Greatest Hits of Investing

An excellent, easy to read, whitepaper from Brad Steiman of Dimensional Fund Advisors. “If free markets fail, it would be easy for investors to systematically beat the market, but in reality, man versus the market isn’t a fair fight and most of us should accept market forces rather than resist them.” Read the entire whitepaper >>

US Inflation and the Returns in Global Stock and Bond Markets

“This study examines the relation between US inflation and the returns on stock and bond indices. The indices include both US and world ex-US versions. The non-US indices are included to assess the extent to which securities in other countries have been impacted by US inflation. The results indicate that the link between US inflation Read more about US Inflation and the Returns in Global Stock and Bond Markets[…]