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Thursday, August 08, 2013

Repetto Messes with DFA's Secret Sauce

News summary by MFWire's editors

Things are going well. Let's change things!

That is pretty much what Dimensional Fund Advisers [profile] is saying by changing its method for building equity portfolios, now that the firm has developed new asset-pricing research, reports InvestmentNews' Jason Kephart.

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."

To read more, click here

Edited by: Casey Quinlan


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