Setting a High Bar for Research

We set a high bar when evaluating research at Dimensional. That's how we determine whether a pattern we see in the data is random or an opportunity to improve results for investors. With any new research, we ask these questions: Do the findings make sense? Let's take the value premium. In 1992, a landmark paper by professors Eugene Fama and Kenneth French showed value stocks and small stocks outperformed in the US. These findings were sensible—— The lower the price you pay for a stock, the higher its expected return. The next question is: Does the pattern show up in other time periods? After the original study, further research showed value beating growth in additional periods. We then ask: Does the premium appear in other markets around the world? Our later research found value also beat growth in developed and emerging markets. These tests further confirm the pattern is robust and not due to chance. But the ultimate test is: Can we capture the premium in live markets? Our 30-year track record of value investing confirms it. At Dimensional, we rigorously test the research to determine whether findings are real or random, and if they can improve expected returns for investors.