We empirically analyze the nature of returns to scale in active mutual fund management. We find strong evidence of decreasing returns at the industry level: As the size of the active mutual fund industry increases, a fund’s ability to out- perform passive benchmarks declines. At the fund...

We analyze the equilibrium size of the active management industry and the role of historical data---how investors use it to decide how much to invest in the industry, and how researchers use it to judge whether the industry's size is reasonable. As the industry's size increases, every manager's...

We empirically analyze the nature of returns to scale in active mutual fund management. We find strong evidence of decreasing returns at the industry level: As the size of the active mutual fund industry increases, a fund's ability to outperform passive benchmarks declines. At the fund level,...