Avantis vs DFA SCV

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Marrduk24
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Joined: Sun Mar 01, 2020 1:32 pm

Avantis vs DFA SCV

Post by Marrduk24 »

All

I was wondering if anyone had insight on differences in construction methodology for DFA Small Cap Value vs Avantis. Seems like Avantis weighs profitability more (not sure how much more) than DFA.

Also seems like their ETF vs Mutual Fund version of SCV is constructed differently because holdings are different. That’s strange because I would have expected them to be same (similar to how Vanguard does it).
kolder
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Re: Avantis vs DFA SCV

Post by kolder »

Yes I believe you are right that Avantis weights profitability more as they target value & profitability jointly, and DFA targets value primarily and then screens out low profitability stocks.

The only other difference I am aware of is that Avantis uses cash-based operating profitability as a proxy for gross profitability but DFA just uses operating profitability.

There are likely other differences though but that's all I've been able to find.
sycamore
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Re: Avantis vs DFA SCV

Post by sycamore »

Maybe you can use portfoliovisualizer to investigate and compare the funds based on a factor regression analysis?
E.g., as discussed in this thread: viewtopic.php?t=324695
Topic Author
Marrduk24
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Re: Avantis vs DFA SCV

Post by Marrduk24 »

sycamore wrote: Sun Nov 22, 2020 10:18 am Maybe you can use portfoliovisualizer to investigate and compare the funds based on a factor regression analysis?
E.g., as discussed in this thread: viewtopic.php?t=324695
AVUV hasn’t existed for long enough for regression analysis to be helpful.
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nedsaid
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Re: Avantis vs DFA SCV

Post by nedsaid »

kolder wrote: Sat Nov 21, 2020 10:26 pm Yes I believe you are right that Avantis weights profitability more as they target value & profitability jointly, and DFA targets value primarily and then screens out low profitability stocks.

The only other difference I am aware of is that Avantis uses cash-based operating profitability as a proxy for gross profitability but DFA just uses operating profitability.

There are likely other differences though but that's all I've been able to find.
Foggy memory recalls that Avantis has tweaked its definition of Book Value. This stuff gets to be pretty inside baseball. Hard to say if one methodology will work better than another, is Avantis going to improve upon what DFA is already doing? It seems that both Size and Value work better if combined with one or two other factors. Quality improves Size and probably Value, setting Momentum to neutral helps Value. The thing is, the market adjusts to all of this, hard to say what the optimal blending of factors will be in the future. One thing we know is that deep Value has been a big disappointment over the last decade.

Larry Swedroe has said that Avantis has constructed its portfolios well and he was impressed. His firm still uses DFA as far as I know but they are also using Avantis and Bridgeway.
A fool and his money are good for business.
caklim00
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Re: Avantis vs DFA SCV

Post by caklim00 »

I think this would be a more interesting conversation if DFA would offer US SCV or International SCV as an ETF option. I'm already made the decision to fly with Avantis but would be nice to have DFA as a tax loss harvest partner.
lassevirensghost
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Re: Avantis vs DFA SCV

Post by lassevirensghost »

I believe that DFA *will* shortly have ETFs, including SCV products.
“Groucho, how do you invest your money?” | “All in bonds.” | “But Groucho, they don’t pay much return.” | “They do when you have a lot of em!”
Angst
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Re: Avantis vs DFA SCV

Post by Angst »

↑ Today you can choose from at least 2 different DFA ETFs that are already available for purchase, and there will be at least another 6 before the end of December, 2020, but still not any dedicated to SCV alone:
Angst wrote: Wed Nov 18, 2020 11:54 am I found some additional news about DFA ETFs in an online article at etfdb.com here:
https://etfdb.com/news/2020/11/17/dimen ... dfau-dfai/

Two previously registered DFA ETF's will begin listing today, Nov 18th, w/ tickers DFAU and DFAI.
In online article, etfdb.com wrote:In addition to the six new funds registered today, two of Dimensional’s previously announced Core Equity Market ETFs are expected to list on NYSE Arca on November 18:
  • Dimensional US Core Equity Market ETF (NYSE Arca: DFAU)
  • Dimensional International Core Equity Market ETF (NYSE Arca: DFAI)
Dimensional also plans to launch an Emerging Core Equity Market ETF in early December.

Note, the EM "Core" equity ETF in the pipeline - I'd be more pleased to see EM Value there.
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happenstance
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Re: Avantis vs DFA SCV

Post by happenstance »

Avantis have a whitepaper (PDF) about their construction methodology, which I summarized in this post. As kolder noted above, Avantis target profitability directly whereas DFA only screen out low-profitability. And as nedsaid notes, they do make adjustments to book value, such as accounting for goodwill.
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