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New Faculty. New Knowledge. With 11 new faculty this year alone, plus 46 over the past 5 years, we're committed to growing business research with impact. New W. P. Carey faculty are addressing global challenges: • How do top management teams facilitate invention performance? • What is the relationship between inflation and growth in developing countries? • How does online word-of-mouth generate more revenue for movies? • What effects do educational choices have on labor, health, and social outcomes? • Did race influence the subprime lending boom? The W. P. Carey School ranks #1 for research productivity in high-impact scholarly journals. And our faculty impart that new knowledge to the business leaders of tomorrow every day. wpcarey.asu.edu Technovation ranking, 2010 research published in the Top 45 academic business journals with the most global impact. 'Familiarity Bias' Sinks Portfolios A STUDY FROM the Indiana University Kelley School of Business in Bloomington has a warning for new mutual fund managers: Don't invest too close to home. Researchers found that when professional investors exhibit a "familiarity bias"—that is, they invest too heavily in companies from their home states—they open their portfolios to excessive risk. Familiarity bias is expected of individual investors, not of professional fund managers trained to diversify their holdings, explain Scott Yonker, Veronika Pool, and Noah Stoffman, all assistant professors of finance at Kel- ley. But the trio found that mutual fund managers are not immune—they over- weight companies from their home states by an average 12 percent. The researchers sampled data from approximately 1,800 unique funds managed by around 2,000 managers. They found that managers Scott Yonker Veronika Pool Noah Stoffman who exhibited the largest levels of familiarity bias com- piled the most inefficient portfolios. Most often, these managers were the least experienced and had the few- est resources. Less sophisticated managers invest in what they know—or what they think they know, says Stoffman. He and his co-authors hope the study will encourage investors to seek out funds run by managers with more experience—and make managers more aware of how they choose their portfolio holdings. "No Place Like Home: Familiarity in Mutual Fund Manager Portfolio Choice" is forthcoming in Review of Financial Studies. It can be downloaded at ssrn.com/ abstract=1844464. BizEd September/October 2012 57