The result of the 3 factor model can be seen below. Over 25 years, the more risk of market, size and value has provided higher returns. To explain how DFA has created index mutual funds to capture these risk factors, we have provided the following information from their web site. DFA's Small Cap Strategies DFA has been a pioneer in small stock research since the firm s start in 1981. Their research has found that small companies worldwide form an asset class with higher expected returns than large companies.
Small stocks allow investors to achieve large diversification benefits.
Dimensional s objective is to deliver the small company effect. To accomplish this, DFA provides index mutual funds that invest in a broadly diversified cross section of small companies in the U.S. and major international markets. Our goal is to be fully invested in equities at all times. We limit ourselves to publicly-traded companies that meet the size criteria of the applicable portfolio. We also employ additional screening criteria.