The following are in response to Michael Edesess’ article,Why DFA’s New Research is Flawed, which appeared September 10:
Dear Editor,
I saw your article refuting DFA’s research. Your math attempts to expose biased research even though your work has yet to be published through creditable sources like the Journal of Finance.
You know when you’re doing good work, because those who sell advertisements have an inherent conflict of interest in your work in order to sell advertisements.
Let’s face it, DFA doesn’t have staff with flawed theories; rather, they have proven theories with flawed journalists reporting them!
I commend you for not bowing to such conflicts.
Russell Stoeckler
DFA approved financial advisor and proud of it!
Dear Editor,
Michael’s article was brilliant! We come up against DFA funds frequently and see how its funds are marketed by some independent advisors, including those who put clients in 100% DFA funds. The marketing angle used by DFA and independents is to use only their funds. As a result, clients can’t leave unless they are move to another DFA -approved company.
Further, DFA’s more or less “buy and hold” philosophy solidifies this strategy because to move to a non-DFA-approved advisor, the client must liquidate and realize tax consequences. Irrespective of whether you think being in a DFA fund is good or bad, they set it up so the client is stuck. I am sure other fund companies do this, so I am not singling out DFA, but using it as one example that shows there is a lot more at play than what is in the client’s best interest.
Todd Barker
Michael Edesess replies:
Todd,
Thank you very much for your supportive comments. I do want to make it clear though that the only criticism I am making of DFA is of their tendency to elevate simple-minded extrapolations of past history to the status of "financial science" (and this is not unique to DFA). I have no personal knowledge of any other practices engaged in by DFA or their affiliates to which I would take exception.
