PodcastBogleheads on Investing

Episode 99, David Booth, the co-founder and Chairman of Dimensional Fund Advisors (DFA), host Rick Ferri

Written by an Ethmos research agent · shared with you

DFA's $1 trillion success stemmed from academic-driven factor research and trading-execution edge, now facing IRS scrutiny over ETF tax-avoidance structures.

ShowBogleheads on Investing

Episode dateOctober 20, 2026

Runtime51 min

FeaturingDavid Booth, Rick Ferri

Academic pedigree: Booth studied under Eugene Fama at University of Chicago in the late 1960s, absorbing Efficient Market Hypothesis theory before leaving the PhD program in 1971 to apply ideas practically.
DFA founding, 1981: Co-founded with Rex Sinquefield out of his Brooklyn apartment, launching the '9-10 Fund' targeting the smallest two deciles (bottom 300) of NYSE stocks, based on Rolf Banz's unpublished small-cap premium research.
Bogle's early help: Jack Bogle provided back-office administrative support and a law firm referral to the fledgling DFA; independent directors included Nobel laureates Merton Miller and Myron Scholes, recruited for free.
Factor investing breakthrough: Fama-French's three-factor model (1992) building on Robert Merton's multi-factor risk theory let DFA formalize size and value ('book-to-market') tilts, birthing its full product lineup including fixed income based on yield-curve research.
Trading edge compounds returns: DFA's flexible block-trading approach outperformed the Russell 2000 by roughly 150 basis points annually after fees over 45 years in its micro-cap fund.
Regulatory scrutiny on tax strategies: Booth discusses IRS notice 2006-62 targeting 351 exchanges, box spreads, and dividend-avoidance trading used by some ETF managers to defer or reduce taxes, noting DFA plans to submit comments.

Deep dive

From farm to Fama

Booth grew up in a Kansas farming community and attended the University of Chicago PhD program in finance specifically because his undergraduate professor had studied there and because the school, along with MIT, was producing landmark empirical finance research in the late 1960s. Taking Eugene Fama's Efficient Market course reshaped his thinking immediately — "it makes total sense to me," he recalls feeling — and he became Fama's research assistant, surrounded by future Nobel laureates. A personal moment at his grandparents' heatless Kansas farmhouse at Christmas 1971, watching relatives enjoy simple contentment while he felt stressed chasing academic approval (including an unimpressed Milton Friedman reaction to a term paper co-written with Roger Ibbotson), pushed him to abandon the professorship track. Fama connected him to Mac McQuown at Wells Fargo, where Booth worked on early index-fund projects alongside consultants Fischer Black and Myron Scholes — the same pair who, during that period, developed the Black-Scholes option pricing model.

The full analysis is a free trial away.

An Ethmos agent found this conversation, listened, and wrote this brief. Yours can do the same — across the shows you follow and the thousands you don't.

Read free — start your trial

TMTB readers: 14-day free trial + 25% off your first month

Also inside: 01 Building DFA from an apartment · 02 Trading edge and capacity limits · 03 The factor-investing turn · 04 Distribution shift and ETF reluctance · 05 Current regulatory scrutiny

This page is an AI-generated summary and analysis prepared with Ethmos and shared by an Ethmos user. It does not reproduce the original programming. The underlying episode and its recording remain the property of their respective creators, and all show and company names are the property of their respective owners.

AI summary. May contain errors. Not investment advice.