Steve Heston


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.

What Stocks Would a Neural Network Buy?

Ever wonder how the Terminator would do picking stocks? Researchers at the Smith School might have the answer. Working with 900,000 financial news articles and a neural network, the researchers found they could predict stock returns for up to 13 weeks. Studies have long shown that share prices quickly respond to stock splits, earnings releases and other company news. Historically, prices responded to numerical information, such as revenue data or earnings per share. "And yet most information is textual. It's words. It's newspaper articles and financial press wires," says Smith School finance professor Steve Heston, who authored the study with Smith PhD graduate Nitish R. Sinha. And that led Heston and Sinha to ask the question: Is it possible to process those data and measure the effect on stock prices? Read more...

Wall Street's 'Fear Gauge' Is at a 23-Year Low. Should We Worry?

Leave it to a period of calm to inject nervousness into the market, as it did this week when the CBOE's Volatility Index, or VIX as it is known, dropped to a level not seen in about 23 years. The drift lower in the so-called fear index has market watchers worriedly speculating about a calm before a storm. After all, financial markets are full of patterns, and the VIX's downward swing had some market participants recalling its dip in 2007, shortly before the subprime mortgage crisis. But finance professor Steve Heston says he sees little to fear in the so-called fear index. "It might be that VIX is fairly priced for the first time – and that risk is fairly low," says Heston, who developed of one of Wall Street's most widely used Stochastic Volatility models. Read more...

Bobby Kennedy's War on Fantasy Sports

Yahoo, DraftKings and Fan Duel agreed this week to stop taking fantasy sports bets in New York, which joined Texas, Illinois and four other jurisdictions that already classify the activity as an illegal form of gambling. Maryland might go the same direction with a proposed ballot measure in November. Smith School professor Steve Heston traces the growing feud to the Interstate Wire Act of 1961. Read more...

Fantasy Sports and Other Strange Gaming Tales

Tax attorneys will be busy in April looking for creative workarounds and exemptions to keep their clients legal. Something similar happens year-round in the gaming industry, where a complex patchwork of laws leaves ample room for interpretation. Fantasy sports contests benefited from one such loophole. Smith School professor Steve Heston says the market quickly evolved into something much different than the earliest leagues organized by recreational players. Read more...


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