How many mutual-fund managers can consistently pick stocks that outperform the broad stock market averages — as opposed to just being...

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How many mutual-fund managers can consistently pick stocks that outperform the broad stock market averages — as opposed to just being lucky now and then?

Countless studies have addressed this question, and have concluded that very few managers have the ability to beat the market over the long term.

Nevertheless, researchers have been unable to agree on how small that minority really is, and on whether it makes sense for investors to try to beat the market by buying shares of actively managed mutual funds.

A new study comes to a rather sad conclusion: There was once a small number of fund managers with genuine market-beating abilities, as judged by having past performance so good that their records could not be attributed to luck alone. But virtually none remains today.

Index funds are the only rational alternative for almost all mutual-fund investors, according to the study’s findings.

The study, “False Discoveries in Mutual Fund Performance: Measuring Luck in Estimating Alphas,” has been circulating for over a year in academic circles.

Its authors are Laurent Barras, a visiting researcher at Imperial College’s Tanaka Business School in London; Olivier Scaillet, a professor of financial econometrics at the University of Geneva and the Swiss Finance Institute; and Russ Wermers, a finance professor at the University of Maryland.

The researchers looked at a database of actively managed domestic equity mutual funds from the beginning of 1975 through 2006. To ensure results were not biased by excluding funds that have gone out of business over the years, they included both active and defunct funds. They excluded any fund with less than five years of performance history. The database contained almost 2,100 funds.

Wermers says he was surprised by how rare stock-picking skill has become. He had “generally been positive about the existence of fund-manager ability,” he said, but these new results have been a “real shocker.”

Why the decline? Wermers says he and his co-authors suspect various causes. One is high fees and expenses.

The researchers’ tests found that, on a pre-expense basis, 9.6 percent of mutual-fund managers in 2006 showed genuine market-beating ability — far higher than the 0.6 percent after expenses were taken into account. This suggests that one in 10 managers may still have market-beating ability. It’s just that they can’t come out ahead after funds’ fees and expenses are paid.

Another possible factor is that many skilled managers have gone to the hedge-fund world. Yet a third potential reason is that the market has become more efficient, so it’s harder to identify undervalued or overvalued stocks.

Whatever the causes, the investment implications of the study are the same: buy and hold an index fund benchmarked to the broad stock market.