Comparing DFA Small Value to Vanguard Small Value

bobby — Mon, 20 Apr 2015 09:00:22 +0000

Over the past few months, the difference in historical performance between DFA Small Value (ticker: DFSVX) and Vanguard Small Value (VISVX) has narrowed. For example, for the 10-year period ending December 2014, the compound annual return of DFSVX was 7.9 percent while VISVX earned 8.3 percent. Comparatively, for the 10-year period ending December 2012, compound annual returns were 11.3 percent for DFSVX and 9.6 percent for VISVX. What explains this reversal?

Examining the Early Period

From January 2003 through December 2012, a factor analysis shows the two funds had roughly comparable exposure to value, but DFSVX had markedly higher exposure to market risk (i.e., beta risk) and owned much smaller companies. Since both the equity market and small-cap stocks did exceedingly well during this period, with an average annual equity premium of 8.0 percent and a size premium of 4.3 percent, it’s not surprising to see that DFA Small Value had substantially higher performance than Vanguard Small Value.

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JMF Capstone Wealth ManagementComparing DFA Small Value to Vanguard Small Value – JMF Capstone Wealth Management

Comparing DFA Small Value to Vanguard Small Value