Some of the important financial theories underlying the behavior of stock returns are summarized. Results of several empirical studies into these theories are also described.
Many studies have discussed whether securities are efficiently priced. The available evidence indicates that professional money managers have not been able to exploit cost-effectively any pricing errors that do occur.
The unpredictability of changes in interest rates has a simple implication that is the basis of Dimensional's bond strategies. Specifically, current prices of discount bonds are good estimates of the prices of bonds with the same maturities one period from now.
The unusually strong performance of large cap stocks in the late 1990s is put into perspective. Patterns in the historical returns represent the normal drift of a random walk.
A transcript of Rex Sinquefield's opening statement in a debate about active vs. passive management with Donald Yacktman at the Schwab Institutional conference in San Francisco, October 12, 1995.
Despite recent arguments to the contrary, there is no evidence of book-to-market ratio (BtM) becoming irrelevant for identifying value stocks. Compared to popular alternatives, BtM is at least as good at producing dispersion in average returns.
We are pleased to announce that Eugene Fama has been awarded the Nobel Prize. Professor Fama's groundbreaking work on asset pricing and markets inspired the founding of Dimensional, and his ongoing contributions have guided our investment approach for more than three decades. We extend our congratulations to Gene for this well-deserved recognition and thank him for his profound impact on Dimensional and investors worldwide.