Things are going well. Let's change things!
That is pretty much what Dimensional Fund Advisers
] is saying by changing its method for building equity portfolios, now that the firm has developed new asset-pricing research, reports InvestmentNews'
DFA has now developed a measure to understand whether a stock will make a profit consistently, Kephart writes. DFA once looked at cash flow and earnings-to-price but now its research focuses on earnings-to-assets and earnings-to-book.
Kephart reports that stock prices, since they are volatile by nature, weren't considered reliable data but assets and book value give a better indication of long term performance.
The new layer of research has been applied to 1 percent of DFA's equity portfolios or seven equity portfolios. Kephart quotes co-chief and CIO of DFA, Eduardo Repetto, as saying, "Right now, we want everyone to understand what we're doing. We don't want anyone to be surprised."
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