`Investment Porn’ Panned by DFA Funds Preaching Fama’s Gospel – Bloomberg

March 27 (Bloomberg) — Weston Wellington looks out at his new recruits and warns them of one of the great evils of Wall Street: “investment pornography.”

Wellington, a vice president at Dimensional Fund Advisors Inc., flashes slides of magazine headlines such as “The Next Microsoft” and “Tech Stocks, Everyone’s Getting Rich.” Investors who read this stuff and scour stock research are deluding themselves, he tells the packed conference. DFA, which manages $123 billion, doesn’t worry about what a company does or how much money it makes before buying its stock.

“We walk in blindfolded,” Wellington says.

Wellington and his colleagues at Santa Monica, California- based DFA preach that no one can predict which way stock prices will go. Their creed is rooted in the efficient-market hypothesis espoused by economist Eugene Fama. A University of Chicago finance professor and DFA director, Fama, 68, maintains that securities prices reflect the collective wisdom of all the participants in a market. Active investors — people who actually pick stocks — rarely beat the market over the long haul, his theory goes.

via `Investment Porn’ Panned by DFA Funds Preaching Fama’s Gospel – Bloomberg.