Vanguard versus the Enhanced Indexers, DFA, RAFI, and WisdomTree: Is Traditional Indexation Passé?

22 Pages Posted: 12 Dec 2012

See all articles by Edward Tower

Edward Tower

Duke University - Department of Economics; Chulalongkorn University-Economics Department

Chao Yang

Duke University, Department of Economics, Students

Date Written: November 20, 2012

Abstract

Vanguard provides low cost cap-weighted mutual funds: traditional index funds. The asset allocation of DFA’s core funds is determined by fundamentals as well as market cap. RAFI’s allocation depends on four fundamental factors — dividends, cash flow, sales, and book equity value. WisdomTree’s is also determined by fundamentals alone. We compare them with corresponding Vanguard mutual fund portfolios. We examined fund returns from March 2007 through June 2012. Focusing on US funds only, DFA and RAFI had lower returns than portfolios of Vanguard funds that mimicked their style; WisdomTree out-returned Vanguard. Thus, some, but not all fundamental indexers have performed well.

Suggested Citation

Tower, Edward and Yang, Chao, Vanguard versus the Enhanced Indexers, DFA, RAFI, and WisdomTree: Is Traditional Indexation Passé? (November 20, 2012). Available at SSRN: https://ssrn.com/abstract=2179188 or http://dx.doi.org/10.2139/ssrn.2179188

Edward Tower (Contact Author)

Duke University - Department of Economics ( email )

213 Social Sciences Building
Box 90097
Durham, NC 27708-0204
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Chulalongkorn University-Economics Department

Bangkok
Thailand

Chao Yang

Duke University, Department of Economics, Students ( email )

Durham, NC
United States

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