The purpose of a case is to challenge you to identify the key issues of the decision situation at hand. Here are a few pointers:
Describe the philosophy and business strategy of DFA. What sort of market behavior are they counting on? What sort of customers are they expecting to have? Are those customers can be considered as mean-variance investors? Are the DFA people really believe in efficient markets?
What kind of market equilibrium DFA envisions?
Describe the pricing framework proposed by DFA. How do they plan to generate ALPHA's ? Will that work?
Do the Fama/French Fundings make sense? Should we expect small stocks to outperform S&P in the future? Value stock to outperform Growth stocks? Please analyze those issues using Ken French' data(below).
Why has DFA small stock fund performed so well?
Is DFA tax-managed funds family likely to be successful, or remain a small niche market?
What should be the firm's strategy going forward?
Please, do not answer these questions one by one. Instead, use them only as ways to prime your own analysis. You may then organize and draft your results in whichever way you see fit. If you feel that you have to make any assumptions, please do it by stating them clearly in your report. I expect the report to be no longer than 7 pages + Excel spreadsheets (if necessary). I would appreciate 12pt font.
| Monthly Returns: | July 1926-today | |
| Annual Returns: | 1927-today | |
| Construction: | The portfolios, which are constructed at the end of each June, from 1926-2000, are the intersections of 5 portfolios formed on size (market equity, ME) and 5 portfolios formed on the ratio of book equity to market equity (BE/ME). The size breakpoints for year t are the NYSE market equity quintiles at the end of June of t. BE/ME for June of year t is the book equity for the last fiscal year end in t-1 divided by ME for December of t-1. The BE/ME breakpoints are NYSE quintiles. | |
| Stocks: | The portfolios for July of year t to June of t+1 include all NYSE, AMEX, and NASDAQ stocks for which we have market equity data for December of t-1 and June of t, and (positive) book equity data for t-1. |
For data, please look at Ken French' web site
Also of interest: DFA web site