Dimensional Fund Advisors has hit a speed bump. So far this year many of the Austin, Texas–based investment firm’s equity funds have dramatically underperformed the Standard & Poor’s 500 Index, which had fallen more than 10 percent as of September 22. That doesn’t faze David Booth, Dimensional’s chairman and co-CEO. Booth says his 600-person shop, which manages $214 billion in equity, fixed-income and other strategies, won’t go changing.

Dimensional’s poor 2011 performance shows that investors can’t reliably outwit the market, says head of research Gerard O’Reilly. That’s no surprise coming from a firm whose board includes University of Chicago economist Eugene Fama, father of the Efficient Market Hypothesis. Booth, 64, has applied academic research to the investment world since he launched the first passive....