Social and Behavioral Sciences Commons^™

Efficiency Of The Mutual Fund Industry: An Examination Of U.S. Domestic Equity Funds: 1995-2004, Chase J. Stewart

Gettysburg Economic Review

Investors have the ability to choose between two different management styles in the mutual fund industry. These two management styles differ in both the investment strategy type the fund executes and management costs, which are charged to the funds’ investors. First, investors may invest their funds in index funds, which employ a passive investment strategy. Here, investors expect to earn a rate of return equivalent to the market index—minus a small management fee—which the fund seeks to track. Alternatively, investors may choose active fund management. The returns of these mutual funds rely on stock selection ability of portfolio managers. Active …