Alternative Measures of Mutual Fund Performance: Ranking DFA, Fidelity, and Vanguard
Handbook of Applied Investment Analysis. Edited by John Guerard and Bill Ziemba, to be published by World Scientific in 2020. October 14, 2019 draft.
53 Pages Posted: 15 Oct 2019
Date Written: October 13, 2019
This chapter evaluates the returns of the domestic equity funds of three major American companies: Vanguard, Fidelity, and Dimensional Fund Advisors relative to benchmarks using the Fama-French factors from January 2001 through December 2018.
We also present Sharpe’s (1992) style analysis combined with the Fama French 25 portfolios, sorted by the dimensions of book to market value and size. Both the two factor and the Sharpe analyses benchmark according to size and valueness. Comparing the two explores the robustness of our findings. Table 6 presents a succinct comparison of the results from both the 2 factor model and the Sharpe analyses. Both methods show that that for Fidelity the index portfolio consistently out-returns the managed portfolio.
Table 7 finds that between 2001and 2018 DFA, the indexed and managed portfolios from Vanguard, and the managed portfolio from Fidelity out-returned the US stock market. This is also true of the Fidelity index portfolio from 2005-2018.
We also construct efficient frontiers to assess which groups of funds and from which families are included and which are left out.
Keywords: DFA, Fidelity, Vanguard, active versus passive investment
JEL Classification: G23, G50
Suggested Citation: Suggested Citation