EFFICIENCY WITH COSTLY INFORMATION - A REINTERPRETATION OF EVIDENCE FROM MANAGED PORTFOLIOS

We investigate the informational efficiency of mutual fund performance for the period 1965-84. Results are shown to be sensitive to the meas urement of performance chosen. We find that returns on S&P stocks, ret urns on non-S&P stocks, and returns on bonds are significant factors i n performance assessment. Once we correct for the impact of non-S&P as sets on mutual fund returns, we find that mutual funds do not earn ret urns that justify their information acquisition costs. This is consist ent with results for prior periods.