“My choice to earn an MBA was very deliberate. I had to consider my family in the decision, and I needed a program that would complement my career. Reputation was important so I looked at a lot of programs. When I came to the Rice campus and met with admissions, I got the sense that this felt right. I wanted to have the full experience. I was sold.”

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An IT supervisor at ExxonMobil, Nadia Bollinger has worked for the energy company 12 years — since she graduated from Texas A&M. She is used to going to school while working, having earned an M.S. in IT Project Management from UH, but that was before she married and had her daughter. Since then everything has changed and her priorities have shifted. “I want the best life for my family. An MBA made sense.” The self- described Pakistani-Canadian- American wants to be involved beyond the classroom, too. She’s got her eye on the finance club, NAWMBA and the Wright Fund. No matter how she gets involved over the next two years, she says, “I feel like I’m at the right place at the right time.” 

Joey Ammouri, Professional MBA '17

“Rice Business Board Fellows was one of the main reasons I chose to attend Rice. I remember thinking what a unique and amazing opportunity it would be to help further a cause I care about. As Board Fellows president, it has been a truly heartwarming and rewarding experience to share my vision, and expand the school’s reach to serve more nonprofits.”

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As a child of immigrants from Nazareth, Joey Ammouri carries with him their drive for success, and selfless passion for giving back and being involved in the community. Along with his position as industrial sales manager at GE, busy social and travel schedule, and passion for running and fitness, Joey is also heavily involved with Big Brothers Big Sisters. He naturally found Rice Business Board Fellows to be the perfect fit when he started business school. Joey was placed with the Positive Coaching Alliance, which partners with youth sports organizations to help kids become “Better Athletes, Better People.” As Board Fellows president, he hopes it will be for others what it’s been for him — a prominent part of his graduate education.

Based on research by Gustavo Grullon, Evgeny Lyandres and Alexi Zhdanov

• Conventional wisdom maintains that volatility tends to hinder overall returns.
• But rising volatility can actually improve firm value with a certain type of flexibility called “real options:” when managers have choices linked to tangible assets such as inventory, machinery, land or buildings, as opposed to financial instruments.
• Firms with real options thrive in uncertain situations because they have the flexibility to change their operations to amplify the effects of good news and dampen the effects of bad news.

Volatile markets look a lot like high-stakes poker games. Wild swings make it hard to chart a course to profitability, inevitably forcing some firms to fold. Yet there are always investors and firms that come out as big winners. So is there is a secret to drawing a winning hand in bad times?

Working with colleagues Evgeny Lyandres of Boston University and Alexei Zhdanov of Pennsylvania State University, Rice Business professor Gustavo Grullon hypothesized that the secret to surviving market volatility has to do with managers’ ability to adjust operations. The more flexibility managers must change the course of their firms, the reasoning went, the greater the likelihood of surviving market volatility — and in some cases profiting from it.

Consider Amazon, founded in 1994 with the goal of becoming “the world's most consumer-centric company, where customers can come to find anything they want to buy online.” From its start as a bookstore, the company turned into an ultra-diversified behemoth able to shrug off vast swings in the market. Despite high volatility in recent years, Amazon’s stock price increased roughly 39 percent, from $1,901 to $2,641, over the past year.

According to Grullon’s theory, having more real options — managerial choices about tangible assets such as inventory, machinery or buildings ⁠— boosts firm value in a whole range of volatile circumstances, whether demand-based, cost-based or profit-based. Firms that have these options ⁠— Amazon, for example ⁠— can act fast to mitigate bad news by changing operating and investment strategies. They might cut production, shutter operations or delay investments. Companies without these tools basically have to ride fate’s rollercoaster.

To test the theory, the researchers compared firms with a plethora of investment opportunities to those with more modest real options. They analyzed returns data from 1963 to 2018 from The Center for Research in Security Prices and from Compustat ⁠— a database of financial, statistical and market information about active and inactive U.S. companies. There is measurable value in having more real options, the researchers found. A bigger spread of real options allowed managers to change strategy as soon as new information arrived. The greater the number of real options, the greater the flexibility managers had at their disposal when the market got volatile.  

Developing Amazon-type options and diversified assets, naturally, takes years of sweat, trial and a measure of luck. Companies that do best at creating such opportunities, the researchers note, tend to be highly sensitive to changes in volatility to begin with, leading to more opportunities to adapt. Overall, the team found, volatility-return relation was strongest in industries already characterized by plenty of growth and strategic options. High-tech firms, pharmaceutical companies and biotech companies, for example, show especially strong resistance to idiosyncratic volatility.

In other words, while volatile markets can resemble high-stakes poker, there are a few predictable rules. When the chips are down, companies that are lucky enough to hold diversified assets, have varied investment options and can shuffle resources quickly will be the strongest players at the table.

Gustavo Grullon is a professor of finance at Jones Graduate School of Business at Rice University.

To learn more, please see: Grullon, G., Lyandres, E. & Zhdanov, A. (2012). Real options, volatility, and stock returns. Journal of Finance, 67(4), 1499-1537.

Adam Saleh '18 shares the reasons he chose Rice Business for his MBA.  

Rich Hoover, a Rice Business EMBA graduate and veteran, talks about how the EMBA program has challenged and enriched his professional life.

Caroline Incavo is a Full-Time MBA student at Rice University. Her advice to prospective students? Step out of your comfort zone and see what Rice Business has to offer!

Kathleen Menezes chose to get her MBA at Rice Business because she understands the power of an MBA and the Rice Business reputation! 

Have questions about the application process, Houston or the Rice Business culture? Mary Feng, Full-Time MBA, loves Rice Business because the alumni and students are receptive and willing to talk about anything! 

Ariel Chen, Full-Time MBA student, chose Rice for her MBA because of the small community that allows her to build close relationships with her professors and make life-long friends. Interested in learning why #YouBelongHere? Try a phone call or coffee chat to learn more about Rice Business to see if it's the right fit.