In this paper we study the Newton stratification on the reduction of Shimura varieties of PEL type with hyperspecial level structure. Our main result is a formula for the dimension of Newton strata and the description of their closure, where the dimension formula was conjectured by Chai. As a key ingredient of its proof we calculate the dimension of some Rapoport-Zink spaces. Our result yields a dimension formula, which was conjectured by Rapoport (up to a minor correction).
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