How can one reconcile the performance of small stocks

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Reference no: EM132206263

Question - Professor Eugene Fama is a strong advocate of an efficient market hypothesis (EMH) and along with Ken French, is an active board member and shareholder in the fund (CEO David Booth was Fama's student). When preparing material you note that the CEO and other sophisticated investors are well-read and aware of Prof Fama's paper proposing that markets are efficient back in 1965 as well as subsequent papers promoting market efficiency.

a. How can one reconcile the performance of small stocks and value stocks with the EMH? Is the existence and success of DFA consistent with the EMH?

b. Are some aspects of DFA's marketing message potentially at odds with passive management? Is the presence of a fund with management (typically called an actively managed fund) inconsistent with the beliefs of the EMH?

Reference no: EM132206263

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