Should individuals include actively managed mutual funds in their investment portfolios? They should if and only if the result of active management is superior performance due to skill. This paper employs a previously ignored statistical technique to detect whether skill drives the superior performance of some mutual funds. This technique, the generalized binomial distribution, models a sequenc...

We generalize the standard competitive rational expectations equilibrium (Hellwig (1980), Verrecchia (1982)) by studying the possibility that informed agents open mutual funds in order to sell their private information. We illustrate how mutual funds endogenously arise in equilibrium and we characterize the fund managers’ optimal investment management fees under imperfect competition. In our mo...

Mutual funds hold large blocks of shares in many major corporations. Practitioners and regulators alike have been concerned that mutual funds use their proxy votes in a promanagement manner in order to garner lucrative pensions administration contracts, thus hindering shareholder value. Such concerns led the SEC to mandate the disclosure of mutual fund proxy votes starting in 2003. We present a...