Based on research by Jefferson Duarte, Christopher S. Jones (University of Southern California), Mehdi Khorram (Iowa State), Haitao Mo (University of Kansas), Junbo L. Wang (Louisiana State)

Key findings:

• Many “can’t miss” option-based trading strategies examined in academic research look impressive on paper because they rely on future data — something no real investor can actually use.
• Once the time-traveling data is removed, those sky-high returns shrink and the risks start to show.
• The pressure to publish big results may help explain why those mistakes were made in the first place.
   

If something seems “too good to be true,” it probably is — and this old axiom is amplified when money is on the line. According to new research by Jefferson Duarte, the Gerald D. Hines Associate Professor of Real Estate Finance at Rice Business, investors should be skeptical of investment strategies that promise big returns with little risk — even when they’re published in academic journals.

We all know the sordid tale of Bernie Madoff. The former New York City asset manager lured investors returns that appeared to far outpace the market. For years, he attracted a steady stream of clients with a seemingly flawless performance record. In reality, investor withdrawals were paid using money from new deposits. When the 2008 financial crisis shook markets, Madoff’s $65 billion Ponzi scheme collapsed. Investors rushed to withdraw funds, but there wasn’t enough cash to go around.

Unfortunately, unrealistic performance claims aren’t limited to bad actors like Madoff. Even some peer-reviewed finance papers describe strategies with returns that appear implausibly high.

For an article forthcoming in The Review of Financial Studies, Duarte and his co-authors dug into the details of several influential empirical options papers. And when they tried to replicate their results, they couldn’t. The authorship team found that the option-trading strategies proposed in these papers exhibited “look-ahead bias” — a statistical error that arises when researchers use information that would not have been available when the trading decisions were actually made. 

“When we eliminated the intraday data from the analysis, the returns were much smaller, and the level of risk also increased. These were not extremely good deals anymore.” 

In layman’s terms, the options trading papers used future data — for example, the average price of a stock or option over the course of a day — to make trading decisions that were supposed to happen at the start of that same day. That’s a problem because, in real life, traders don’t know what the average price will be until the day is over.

So, the authors of these influential empirical options papers were effectively “looking ahead,” using information from the future to make their predictions. This made the results appear far stronger than they would be in reality — essentially giving the strategies an unfair, time-traveling advantage.

One influential study published several years ago claimed that a simple options-based approach could generate astonishing daily mean returns of more than 3%. The strategy involved buying and selling call options — contracts that give investors the right to purchase a stock at a specified price.

To decide which call options to trade, the researchers used filters based on liquidity — how easily a contract can be bought or sold without affecting its price. But their method relied on each contract’s average price over the entire trading day to make selections at the start of that same day — using information that wouldn’t actually be known until after markets closed. When Duarte and his co-authors replicated the strategy using only information available at the start of the trading day, the returns proved far more modest. 

“Just imagine profiting a few percentage points per day,” says Duarte. “If you could do that every day for years, you would have a money wealth machine. But in practice, you would need a crystal ball to do this. When we eliminated the intraday data from the analysis, the returns were much smaller, and the level of risk also increased. These were not extremely good deals anymore.” 

But why was a paper with such a significant error published in the first place? Publication bias within academia could have contributed. Academic journals favor research that has very strong results, and this can nudge authors to find ways to make their results look stronger than they actually are. 

Simply put, if a proposed options-trading strategy did not generate exceptionally high returns, it might never have been published. But a strategy showing smooth gains averaging more than 3% per day is bound to attact attention — even if it isn’t actually feasible. 

Duarte’s research examined only three options papers, and he believes there may be more cases of look-ahead bias in the empirical options literature. One concrete way researchers can improve on this is to provide a clear, detailed description of their methods so others can replicate the results. 

To reproduce the findings in one study, Duarte and his co-authors had to test 190 different procedures just to figure out how the sample had been selected. If published papers were easier to replicate, he says, it would be far simpler to detect look-ahead biases in the first place. 

Duarte also argues that researchers should exercise restraint when selecting their sample. While the use of filters is common in options research and can help remove data errors, they also create opportunities for mistakes — such as look-ahead bias — to slip in.

And if any options strategy appears to outperform the market by a wide margin, it should invite additional scrutiny. Exceptional risk-adjusted returns may signal that an error in the empirical analysis has gone unnoticed.

“When you talk to practitioners — people that actually implement these option strategies,” Duarte says, “they will tell you that these high risk-adjusted returns simply can’t happen on a consistent basis. When they try to replicate a strategy like this, they can’t do it either.”

Written by Ty Burke

Duarte, et al. “Too Good to Be True: Look-ahead Bias in Empirical Options Research.” Forthcoming in The Review of Financial Studies (2025). 

If you spend enough time on campus, you start to realize business school isn’t a place so much as a network in motion. It moves through classrooms, coffee chats and long nights of group work. The peers sitting next to you in class, the alumni a few years ahead of you and the professionals you meet through events and internships — all of these people and moments form the network that will shape your career long after graduation.

Networking has a reputation for being transactional, but it’s really about curiosity — about paying attention to people and what they care about. The good news is, you can practice that every day. 

Here are some tips to keep in mind.

1. Lead With Presence

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Janet Moore, senior lecturer and director of the Rice Business communication program, says that effective networking begins with how you show up. Preparation, attention and respect all communicate confidence.

“Confidence, not arrogance, is a key element of executive presence. Effective networkers exude executive presence while also communicating interest in others,” she says. “People remember how you make them feel — so focus on listening as much as you speak.”

That means preparing before events, asking thoughtful questions and showing genuine interest in others’ experiences. Presence also includes nonverbal cues — eye contact, posture, dress — that signal confidence and approachability.
 

2. Be Curious

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Jessica Campbell, executive director of the Career Development Office at Rice Business, encourages MBA students to think of networking as exploration, not extraction.

“People can tell when you’re reaching out for a transaction instead of a connection,” says Campbell. “Start by learning someone’s story and finding common ground. Trust grows when you lead with curiosity, not a request.”

Instead of asking, “Can you help me get a job?” Campbell suggests asking questions like “What do you enjoy most about your role?” or “What skills helped you succeed in your industry?” Curiosity opens doors that self-interest can close.

3. Diversify Your Connections

It’s easy to gravitate toward classmates or colleagues who share your background, interests or career goals. But your most valuable connections often come from unexpected places.

Join a club outside your comfort zone, attend a conference in a different field or volunteer for a cross-functional project. These experiences expand not only your network but also your perspective.

4. Follow Up — and Stay in Touch

The real work of networking happens after the first meeting. Send a short thank-you email, share an article related to a conversation you had, or simply check in periodically. Relationships deepen over time through small, consistent gestures of interest and respect.

“The conversation shouldn’t end when you walk out of the room,” Moore says. “A thoughtful follow-up shows that you valued the interaction — and gives you a chance to start building a relationship.”

5. Remember: Networking Is a Long Game

Your network doesn’t end when you graduate — it evolves with you. Stay curious, keep showing up, and you’ll find that the best connections are the ones that grow alongside your career.

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As Campbell notes, “The connections you make now may pay off years later. Listen, show respect, and invest in relationships over time, and you’ll build social capital that will carry you through every stage of your career.”

The MBA experience is one of the few times in your career when you’re surrounded by hundreds of ambitious, curious people who want to help each other grow. Show up with confidence, stay curious and play the long game — and you’ll leave business school with more than a degree. You’ll leave with a network that lasts a lifetime.
 

Explore the Rice MBA 

Owl Have You Know

Season 5, Episode 19

One year ago, the Virani family made a historic gift to Rice Business, establishing the Virani Undergraduate School of Business. To mark the occasion, Owl Have You Know welcomes Farid Virani — entrepreneur, philanthropist and proud Rice University parent.

In 1999, Farid founded Prime Communications with a single storefront in Houston’s Baybrook Mall. Today, Prime Communications is the largest AT&T authorized retailer in North America, with more than 2,500 locations across the U.S., Canada, and Mexico. Along the way, Farid has relied on three guiding principles — "stay humble, hungry and scrappy" — which continue to shape his approach to business and life.

He joins host Maya Pomroy ’22 to share his entrepreneurial journey, the Virani family’s commitment to education and community, and the vision behind the Virani Undergraduate School of Business — a school designed to empower the next generation of ethical, curious, and compassionate business leaders.

Watch

Listen

Subscribe to Owl Have You Know on Apple Podcasts, Spotify, Youtube or wherever you find your favorite podcasts.

Based on research by Jung Youn Lee, Eric Anderson (Northwestern) and Joonhyuk Yang (Notre Dame)

Key findings:

• An alternative credit score based on retail shopping data helps borrowers lacking a traditional credit history get approved for a credit card.
• Retail-based credit scores can lower default rates if lenders keep approval volumes steady.
• Based on their own customer data, lenders can build tools that generate alternative credit scores from borrowers’ shopping patterns.
   

Over a billion people worldwide can’t access credit cards or loans because a traditional credit score stands in their way. Without a formal borrowing history, banks view them as unreliable and risky. To expand access, lenders have experimented with other ways to assess borrowers, including on-time utility or mobile payments.

Previous research from Rice Business assistant professor of marketing Jung Youn Lee has shown that grocery store receipts can promote upward mobility and expand access to credit. Her new study builds on that research, analyzing broader consumer spending data to reveal how lenders can use it to create alternative credit scores for people with no credit history.

Forthcoming in the Journal of Marketing Research, the study finds that when lenders use data from daily purchases — at grocery, pharmacy, and home improvement stores — credit card approval rates rise. The findings give lenders a powerful new tool to connect the unbanked to credit, laying the foundation for long-term financial security and stronger local economies.

Turning Shopping Habits into Credit Data

To test the impact of retail transaction data on credit card approval rates, the researchers partnered with a Peruvian company that owns both retail businesses and a credit card issuer. In Peru, only 22% of people report borrowing money from a formal financial institution or using a mobile money account.

The team combined three sets of data: credit card applications from the company, loyalty card transactions, and individuals’ credit histories from Peru’s financial regulatory authority. The company’s point-of-sale data included the types of items purchased, how customers paid, and whether they bought sale items.

“The key takeaway is that we can create a new kind of credit score for people who lack traditional credit histories, using their retail shopping behavior to expand access to credit,” Lee says.

The final sample included 46,039 credit card applicants who had received a single credit decision, had no delinquent loans, and made at least one purchase between January 2021 and May 2022. Of these, 62% had a credit history and 38% did not.

Using this data, the researchers built an algorithm that generated credit scores based on retail purchases and predicted repayment behavior in the six months following the application. They then simulated credit card approval decisions.

Retail Scores Boost Approvals, Reduce Defaults

The researchers found that using retail purchase data to build credit scores for people without traditional credit histories significantly increased their chances of approval. Certain shopping behaviors — such as seeking out sale items — were linked to greater reliability as borrowers.

For lenders using a fixed credit score threshold, approval rates rose from 15.5% to 47.8%. Lenders basing decisions on a target loan default rate also saw approvals rise, from 15.6% to 31.3%.

“The key takeaway is that we can create a new kind of credit score for people who lack traditional credit histories, using their retail shopping behavior to expand access to credit,” Lee says. “This approach benefits unbanked applicants regardless of a lender’s specific goals — though the size of the benefit may vary.”

Applicants without credit histories who were approved using the retail-based credit score were also more likely to repay their loans, indicating genuine creditworthiness. Among first-time borrowers, the default rate dropped from 4.74% to 3.31% when lenders incorporated retail data into their decisions and kept approval rates constant.

For applicants with existing credit histories, the opposite was true: approval rates fell slightly, from 87.5% to 84.5%, as the new model more effectively screened out high-risk applicants.

Expanding Access, Managing Risk

The study offers clear takeaways for banks and credit card companies. Lenders who want to approve more applications without taking on too much risk can use parts of the researchers’ model to design their own credit scoring tools based on customers’ shopping habits.

Still, Lee says, the process must be transparent. Consumers should know how their spending data might be used and decide for themselves whether the potential benefits outweigh privacy concerns. That means lenders must clearly communicate how data is collected, stored, and protected—and ensure customers can opt in with informed consent.

Banks should also keep a close eye on first-time borrowers to make sure they’re using credit responsibly. “Proactive customer management is crucial,” Lee says. That might mean starting people off with lower credit limits and raising them gradually as they demonstrate good repayment behavior.

This approach can also discourage people from trying to “game the system” by changing their spending patterns temporarily to boost their retail-based credit score. Lenders can design their models to detect that kind of behavior, too.

The Future of Credit

One risk of using retail data is that lenders might unintentionally reject applicants who would have qualified under traditional criteria — say, because of one unusual purchase. Lee says banks can fine-tune their models to minimize those errors.

She also notes that the same approach could eventually be used for other types of loans, such as mortgages or auto loans. Combined with her earlier research showing that grocery purchase data can predict defaults, the findings strengthen the case that shopping behavior can reliably signal creditworthiness.

“If you tend to buy sale items, you’re more likely to be a good borrower. Or if you often buy healthy food, you’re probably more creditworthy,” Lee explains. “This idea can be applied broadly, but models should still be customized for different situations.”

By Deborah Lynn Blumberg

Anderson, Lee, and Yang. “Who Benefits from Alternative Data for Credit Scoring? Evidence from Peru.” Forthcoming in Journal of Marketing Research (2025). https://doi.org/10.1177/00222437251360996

The right internship can change everything. It’s often the first real test of whether the career you’ve imagined feels right in practice and the first big step toward where you want to go.

At Rice Business, we make sure students are ready when opportunity shows up. 

Our MBA Career Seminar gives Full-Time MBA students the tools, strategies and confidence to take charge of their internship search. With one-on-one support from the Career Development Office, students learn to tell their story, build connections and pursue roles that fit their goals.

Why We Built the Rice Business Career Seminar

Recruiting season can feel like a full-time job. We designed this seminar to make it more doable, structured, and grounded in real experience, offering students more support in an increasingly dynamic and competitive environment.

“The Career Seminar has given students a dedicated space to ask questions and actively work on their recruiting strategy,” says Mariella De Alba Ortiz, a senior associate director on the CDO team. “We’ve seen them fully engaged — participating in discussions, practicing outreach and exploring new resources that strengthen their search. It’s been exciting to watch them gain confidence and clarity as they shape their individual recruiting paths.”

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Our CDO advisors take into consideration feedback from both Rice Business student leaders and top employers alike to curate a well-structured curriculum that prepares students to stand out during recruitment.

From the very start of their first semester, students gain both guidance and accountability. The seminar helps them stay on track with key milestones while developing the skills that matter long after the MBA: communication, adaptability and self-awareness.

Inside the Seminar 

Designed to give students both structure and confidence, the seminar combines tactical skill-building with real-world practice. Students refine their personal brand, master networking and interviewing, and build a sustainable recruiting strategy tailored to their goals — all while learning how to keep momentum through changing plans.

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Here’s a look at some of what’s covered:

• Networking in Action: Coffee Chats
• Recruiting Roadmap: Timelines, Targets and Strategy
• Personal Brand & Value Proposition
• Behavioral Interviews I: STAR Stories
• Behavioral Interviews II: Alumni Panel and Fish Bowl
• Communicating with Recruiters and Evaluating Offers
• Sustaining Your Search

Together, the sessions form a complete roadmap for internship recruiting, helping students sharpen their professional identity, connect confidently with employers and approach interviews and offers with clarity.

Who It’s For

The Career Seminar was designed specifically for our Full-Time MBA students, who face a fast-paced recruiting cycle in their first semester. These sessions provide targeted, timely guidance just when it’s needed most.

Our working professional programs also receive robust career resources, but this hands-on, semester-long series is currently exclusive to full-time students. Because they step away from their careers during the two-year program, we provide Full-Time MBAs with this guidance to help them reenter the workforce with valuable internship experience.

Recruiting at Rice Business

At Rice Business, students don’t go through recruiting alone. The Career Seminar is built into the experience — not as an optional add-on, but as a core part of what makes our MBA program distinctive.

Every step is designed to help students turn preparation into confidence, and confidence into results. Learn more about companies that recruit at Rice Business.

Explore the Rice MBA 

The 10th annual Sparking Success Conference is set for Oct. 31, when attendees can experience a forum full of industry professionals, leaders and experts to network and learn important skills in the ever-changing world of business.

This year’s keynote speakers are Mohammed Anwar, Jeff Ma and Frank Danna to discuss their bestseller “Love as a Change Strategy: Innovation, Growth and Transformation.” The book follows the inside story of how they reorganized every layer of their company, Softway, and offers a blueprint for how to lead any change from a place of love.

Several Rice faculty members will present their research and expertise in sessions and dialogues, including Ruth Lopez Turley, director of the Kinder Institute for Urban Research and professor of sociology; Danielle King, associate dean of graduate and postgraduate studies and associate professor of psychological sciences; and Constance Porter, senior associate dean for belonging and engagement and associate clinical professor of marketing, will provide welcome remarks.

A number of industry leaders and insiders will sit on panels and host breakout sessions to ensure attendees receive timely, impactful experiences. This features executives from Cheniere Energy, JP Morgan Chase, the Houston LGBTQ Chamber and the Houston Minority Supplier Diversity Council discussing change management as well as sessions on neurodiversity and imposter anxiety.

Rice Business Sparking Success Conference — 10th anniversary
Friday, Oct. 31
8:30 a.m. – 1:30 p.m.
Register here

The Office of Belonging and Engagement at Rice Business fosters positive and productive collaboration among students, faculty, staff, alumni and the community. Learn more about Rice Business’ Belonging and Engagement team and activities here.