Enhanced versus Traditional Indexation for International Mutual Funds: Evaluating DFA, WisdomTree and RAFI Powershares

15 Pages Posted: 3 Jul 2013

See all articles by Heehyun Lim

Heehyun Lim

Duke University

Edward Tower

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

Date Written: June 26, 2013

Abstract

Do enhanced index funds beat traditional ones? The major companies that offer the new enhanced index international mutual funds are Dimensional Fund Advisors (DFA), RAFI, and WisdomTree. A major provider of traditional international index funds is DFA. We compare various enhanced international index fund portfolios from these providers with individualized benchmark portfolios composed of DFA traditional international funds. On average, (1) the RAFI power share portfolio out-returned its corresponding DFA traditional benchmark portfolio by 0.82%/year, (2) the average DFA enhanced portfolio under-returned by 0.14%/year, and (3) the WisdomTree portfolio under-returned by 1.01%/year. One cheer for enhanced international indexation and two for traditional indexation.

Keywords: Enhanced index fund, Fundamental indexation, Style analysis

JEL Classification: G11, G15

Suggested Citation

Lim, Heehyn and Tower, Edward, Enhanced versus Traditional Indexation for International Mutual Funds: Evaluating DFA, WisdomTree and RAFI Powershares (June 26, 2013). Available at SSRN: https://ssrn.com/abstract=2288677 or http://dx.doi.org/10.2139/ssrn.2288677

Heehyn Lim

Duke University ( email )

100 Fuqua Drive
Durham, NC 27708-0204
United States

Edward Tower (Contact Author)

Duke University - Department of Economics ( email )

213 Social Sciences Building
Box 90097
Durham, NC 27708-0204
United States
919-660-1818 (Phone)
919-684-8974 (Fax)

Chulalongkorn University-Economics Department

Bangkok
Thailand

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