Information search in the mutual fund market in the U.S. A.

Abstract

Sequential decision‐making principles are introduced which can be applied to mutual fund investing. Specific attention is given to the nature of the mutual fund market and the expected pay‐off from a low‐cost information search. Empirical results are based on historical returns and information that is readily available in popular press sources. Substantial variation in historical performance was found and the pay‐off from a market search was positive and substantial in many cases.