Baruch Questions for Case at the Dimensional Fund Advisors - Questions for Case at the Dimensional Fund Advisors(The Size Effect and The Value

Baruch Questions for Case at the Dimensional Fund Advisors

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Questions for Case at the Dimensional Fund Advisors (The Size Effect and The Value Effect). Answer all the questions below in the context of the case. Points of each question are in parenthesis. Total Points: 30 1. What are the three pillars of DFA's business strategy? (2) 2. If a stock generates high CAPM alpha, it is: (2) A. underpriced in the CAPM world B. overpriced in the CAPM world C. fairly priced in the CAPM world D. unrelated to whether a stock is mispriced in the CAPM world
3. What theories/models may justify that small and value stocks are underpriced? (2)
4. What theories/models may justify that small and value stocks are fairly priced? (choose the best answer) (2)
5. Read Chapter 8.1 and 8.3 in the textbook and then answer the following question: DFA’s business practices of trying to avoid the lemons problem while not doing any fundamental analysis suggest that they believe ___ form of market efficiency but worried that ___ form of market efficiency might fail. (2)

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