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.

Economic Research Initiatives at Duke (ERID) Working Paper No. 291

53 Pages Posted: 15 Oct 2019

See all articles by Chong Li

Chong Li

Duke University, Trinity College of Arts & Sciences, Department of Economics; Sichuan University

Edward Tower

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

Rhona Zhang

North Carolina School of Science and Mathematics, Students

Date Written: October 13, 2019

Abstract

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

Li, Chong and Tower, Edward and Zhang, Rhona, Alternative Measures of Mutual Fund Performance: Ranking DFA, Fidelity, and Vanguard (October 13, 2019). Handbook of Applied Investment Analysis. Edited by John Guerard and Bill Ziemba, to be published by World Scientific in 2020. October 14, 2019 draft., Economic Research Initiatives at Duke (ERID) Working Paper No. 291, Available at SSRN: https://ssrn.com/abstract=3469834 or http://dx.doi.org/10.2139/ssrn.3469834

Chong Li (Contact Author)

Duke University, Trinity College of Arts & Sciences, Department of Economics ( email )

Durham, NC
United States

Sichuan University

No.24 South Section 1, Yihuan Road
School of Economics
Chengdu, Sichuan 610065
China

Edward Tower

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

Rhona Zhang

North Carolina School of Science and Mathematics, Students ( email )

Durham, NC
United States

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