Both conventional wisdom and earlier studies of mutual fund performance found that removing closed funds from performance databases raised the overall performance of the industry. However, a new study from Lipper demonstrates that this effect is much less profound than thought, and is primarily concentrated in certain investment styles, Reuters reports.

Removing funds that have been closed creates "survivorship bias," a phenomenon where only those funds healthy enough to survive are included in the industry averages. This culls out the weaker members of the herd, and authors of past studies have criticized the industry for deceiving investors with artificially inflated performance figures because of it.

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