Brooklyn Quant Experience Lecture Series: Steven Heston
Meeting ID: 971 5155 1289
The Department of Finance and Risk Engineering welcomes, Steven Heston, Professor of Finance at University of Maryland, College Park, to the BQE Lecture Series.
This paper computes exact returns on equity-V IX option portfolios to investigate momentum in options across different S&P 500 stocks. Stock options with high historical returns continue to outperform options with low returns. This predictability has a quarterly pattern, resembling the pattern of stock momentum found by Heston and Sadka (2008). In contrast to stock momentum, option momentum lasts for up to five years, and does not reverse.
The profitability of option momentum is distinct from the profitability of option value, as measured by historical variance divided by current equity-V IX price. It is also not explained by systematic risk, stock characteristics, nor bid-ask spreads.
Steve Heston graduated with a BS double major in Mathematics and Economics from the University of Maryland, College Park in 1983. He attended the Graduate School of Industrial Administration and earned an MBA in 1985 followed by a PhD in Finance in 1990. He has held previous faculty positions at Yale, Columbia, Washington University, and the University of Auckland in New Zealand. He has worked in the private sector with Goldman Sachs in Fixed Income Arbitrage and in Asset Management Quantitative Equities. He is known for analyzing options with stochastic volatility and international stock risk.