Houston research: Can predictive tools help forecast the stock market?

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The stock market has always been hard, if not impossible, to forecast. Image via Getty Images

What do you think the Standard & Poor’s 500 index will do over the next year?

When Rice Business finance professor Kevin Crotty asks his MBA students this question, the answers are all over the map. Some students expect the overall return on the stock market to be 10 percent, while others predict a loss of 20 percent.

This guessing game is closer to real life than many people realize. Experienced investors, people who have watched the stock market ebb and flow for many years, know that making predictions is a risky business. “Many money managers are more confident choosing individual stocks than trying to time the market,” says finance professor Kevin Crotty.

For most of the past century, academics have applied their power of analysis to understanding and predicting the stock market. Recently, some finance researchers have taken a closer look at option prices—the price paid for the right to buy or sell a security (like a stock or bond) at a specified price in the future. Combining economic theory with high-frequency options price data, they argued that they could estimate the expected return on the market in real-time, which would represent a tremendous development for finance practitioners and academics alike.

Crotty teamed up with Kerry Back, a fellow Rice Business professor, and Seyed Mohammad Kazempour, a finance Ph.D. student at the Jones Graduate School of Business, to evaluate whether the new predictors based on option prices really are a valuable forecasting tool. “Options are essentially a forward-looking contract, so it’s possible that they could be used to create a forward-looking measure of expected returns,” says Kazempour.

Economic theory suggests that the new predictors might systematically underestimate expected returns. The team set out to test if this may be the case, and if so, whether the predictors are useful as a forecasting tool. In their paper, “Validity, Tightness, and Forecasting Power of Risk Premium Bounds,” the Rice Business researchers ran the predictors through a more rigorous set of statistical tests that provide more power to detect whether the predictors systematically underestimate expected returns. The statistical tests used in previous research on the topic were less stringent, leading to conclusions that the predictors do not underestimate expected returns.

In short, the new predictors didn’t pass the more stringent tests. The researchers found that forecasts built on stock options consistently underestimated market returns. Moreover, the predictors are enough of an underestimate that they are not very useful as forecasts of market returns.

The results were somewhat anticlimatic, the researchers admit. If the option-based predictors had panned out, it could have become an innovative new tool for thinking about market timing for asset managers as well as investment decision-making for corporate finance projects. “Trying to estimate expected market returns is closely related to whether corporations decide to invest in projects,” notes Crotty. “The expected market return is an input in estimating the cost of capital when evaluating projects, and I explain in my MBA courses that we don’t have very precise estimates for this input. During this research project, I kept thinking about how cool it would be if we really had a better estimate,” he says.

Their research doesn’t end here. Crotty and Back have already begun brainstorming ways to potentially improve the option-based forecasting tool so that it can become more accurate.

At best, though, using option prices as a forecasting tool will only be one ingredient out of many that investors use to make decisions. “This tool may inform money management, but it will never drive it,” says Back.

For now, at least, the Rice researchers believe that trying to predict the stock market is still a very risky game.

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This article originally ran on Rice Business Wisdom and was based on research from Rice Professors Kerry Back and Kevin Crotty.

Investors might be drawn to active fund investing, but index funds might be less risky, according to Rice University researchers. Getty Images

Rice University research finds how index funds can be a good investment opportunity for the risk adverse

Houston Voices

It's easy to assume that investing, like cooking, requires skill to get the right mix of ingredients. But that's not the case with index funds. Effort goes into building them, but these ready-made investments need minimal intervention. Yet the outcomes are appetizing indeed.

In the past few decades, use of index funds has exploded. So have media coverage and advertisements questioning if they can truly compete with active funds. A recent study by Alan Crane and Kevin Crotty, professors at the business school, provides a resounding "yes." These humble investment recipes, it turns out, are richer than they might seem.

Index funds track benchmark stock indexes, from the familiar Dow Jones Industrial Average to the widely followed Standard & Poor's 500. Like viewers following a cooking show, index fund managers buy stocks in the same companies and same proportions as those listed in a stock index. The best-known indices are traditionally based on the size of the companies.

The idea is that the index fund's returns will match those of its model. An S&P 500 index fund, for example, includes stocks in the same 500 major companies included in the Standard & Poor index, ranging from Apple to Whole Foods.

Index funds are part of the broad range of investment products called mutual funds. Like cooks making a stew, mutual fund managers add shares of various stocks into one single concoction, inviting investors to buy portions of the whole mixture.

While some mutual funds are active, meaning professional managers regularly buy and sell their assets, index funds are passive. Their managers theoretically just need to keep an eye on any changes in the index they're copying. Not surprisingly, active index funds tend to charge more than passive ones.

Curiously, not all index funds perform at the same level. So what should that mean for investors? To study these variations and their implications, Crane and Crotty expanded on past research about skill and index fund management, analyzing the full cross section of funds.

This wasn't possible to do until fairly recently: there simply weren't enough index funds to study. The first index fund, which tracked the S&P 500, was developed by Vanguard in the 1970s. To do their research, the Rice Business scholars looked at performance information for both index and active funds, starting their sample in 1995 with 29 index funds. The sample expanded to include a total of 240 index funds, all at least two years old with at least $5 million in assets, mostly invested in common stocks. They also analyzed 1,913 actively managed funds.

Using several statistical models, Crane and Cotty found that outperformance in index-fund returns was greater than it would be by chance. The discovery suggests that passive funds, although they require little skill to run, have almost as much upside as active funds.

In fact, the professors found, the best index funds perform surprisingly closely to the best active funds, but at a lower cost to the investor. The worst active funds perform far worse than the worst index funds–even before management fees.

The findings topple the conventional wisdom that only actively managed funds stand a chance of beating the market. While active-fund managers often measure their success against that of passive funds, the data show investors who are risk averse would do better to choose passive funds over more expensive active ones.

More adventurous investors, of course, will always be tempted by what's cooking in actively managed funds. But overall, investing in plain index funds is as good a meal at a lower price.

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This story originally ran on Rice Business Wisdom.

Alan D. Crane and Kevin Crotty are associate professors of finance at the Jones Graduate School of Business at Rice University.

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10+ can't-miss Houston business and innovation events for September

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The energy transition and AI will be the talk of this town this month, thanks to a packed calendar of Houston events. September brings the return of Houston Energy and Climate Startup Week and some of its signature anchor events, plus AI conferences and talks exploring how the technology is impacting everything from healthcare to leadership. Here’s what not to miss and how to register. Please note: this article may be updated to add more events.


Sept. 3 — Entrepreneurship Roundtable with Open

Open Houston and the Ion present this roundtable event to bring together founders, builders, and innovators at various stages of venture development. This month's session will feature Faisal Bhutto, president and CEO of Houston-based AI and tech consulting firm Alykas.

This event is Thursday, Sept. 3, from 10-11:30 a.m. at the Ion. An optional lunch ticket is available for purchase. Register here.

Sept. 3 — AI Operator Spotlight: Houston’s Top AI Leaders Open Their Playbooks

The Houston AI Club, Allenix, the Ion District and Collide are bringing together industry leaders to share their expertise and first-hand experiences building AI companies. The event will feature a panel with Chuck Yates, co-founder of Collide, and Charles Jessup, senior manager of AI fluency at Raytheon, plus an open networking session.

This event is Thursday, Sept. 3, from 5:30-8 p.m. at the Ion. Register here.

Sept. 8 — The Technology Leadership Advantage Series – For CEOs, VCs and PE Firms

Ram Prasad, CEO of Houston-based IT consulting firm Delence, will explore the role of leadership in turning AI investments into business value during the latest installment of this series at the Ion. The event will explore why AI strategies often fail before the technology does and how companies should approach AI ownership, governance, investment and accountability.

This event is Tuesday, Sept. 8, from noon-1 p.m. at the Ion. Register here.

Sept. 14–18 — Houston Energy and Climate Startup Week

Houston Energy and Climate Startup Week returns for its third year, with panels, happy hours and pitch days focused on the energy transition. See the schedule of events here. The week will begin with a kickoff block party and open house at the Ion.

This event starts Monday, Sept. 14. The Ion District will host many of the week's events. Find more information here.

Sept. 15 — Meet the Activate Houston Cohort 2026 Fellows

Meet Activate's latest cohort, which was named this summer, and learn more about their hardtech and climate-focused solutions. Also meet founders from the organization’s 2025 cohort during Houston Energy and Climate Startup Week.

This event is Tuesday, Sept. 15, from 5-7 p.m. at the Ion. Register here.

Sept. 15 – Cypher Pilotathon and Startup Showcase

Grab coffee and take in keynotes and panels featuring leaders from Amperon, Aramco Ventures, New Climate Ventures, Syzygy Plasmonics and many others during this signature event, this year under the theme “The NEW Energy Industrial Revolution.” After lunch, hear pitches from 31 ventures during the Pilotathon. This year's event will also feature a startup showcase with interactive booths where attendees can meet founders and see demonstrations, plus an industry hub where corporates and investors can engage with emerging technologies and identify the pilots they want to move forward with.

This event is Tuesday, Sept. 15, from 9 a.m.-5 p.m. at POST Houston. Get tickets here.

Sept. 15-17 — The AI in Health Conference

Rice University's Ken Kennedy Institute will present this future-focused event, aimed at bridging the gap between artificial intelligence and real-world health outcomes. The event will feature panels with leaders from institutions and companies from around the world, plus technical talks, poster presentations and networking receptions.

This event begins Tuesday, Sept. 15 at 8 a.m. at the BRC at Rice University. Register here.

Sept. 16 — Greentown Labs Climatech Summit

Entrepreneurs, investors, corporate leaders, policymakers and philanthropists will head to Houston this month for the annual Greentown Climatetech Summit. Hear from Greentown CEO Georgina Campbell Flatter and keynote speaker Tim Latimer, CEO and co-founder of Houston geothermal unicorn Fervo Energy, plus numerous other engaging panels at the Ion. Then head to Greentown Labs for an open house and startup showcase, where attendees can meet some of the climatech incubators' members, before taking in the startup pitch competition followed by happy hour over at the Continental Club.

This event is Wednesday, Sept. 16, from 8 a.m.–9 p.m. at multiple locations. Register here.

Sept. 18 — Rice Alliance Energy Tech Venture Forum

Hear from clean energy startups from around the world at the 23rd annual Energy Tech Venture Forum. In addition to the pitches, this event will also host keynotes from Sean Maher, chief economist at Phillips 66, and Ira Ehrenpreis, founder and managing partner of DBL Partner. Panels will focus on technologies, infrastructure and commercialization strategies needed to deploy breakthrough innovations at scale. Following the event, the Rice Alliance will also name its annual “Most Promising” startup.

This event is Thursday, Sept. 17, from 7:30 a.m.-5 p.m. at Rice University’s Jones Graduate School of Business. Register here.

Sept. 23 – Houston Methodist Innovation Discussion

Houston Methodist presents its latest Innovation Discussion this month for the Houston health IT community. This month's event will feature Dr. Jordan Dale, chief medical information officer and chief health AI officer at Houston Methodist, and Ginny Torno, executive director of innovation and IT clinical, ancillary and research systems for Houston Methodist. The two will share insights into Houston Methodist’s innovation strategy and approach to scaling new ideas, plus real-world lessons on AI adoption and more.

This event is Wednesday, Sept. 23, from 5:30-7 p.m. at the Ion. Register here.

Sept. 23 — UH Energy Career Fair

Find your next job or team member at UH's energy-focused career fair. The event will feature companies from the fossil fuels, electrical power, nuclear power and renewables industries; plus nonprofits, governmental agencies and startups. And though the event is geared toward business, engineering, technology and science majors, it is open to students of all majors.

This event is Wednesday, Sept. 23, from 11 a.m.-2 p.m. at the UH Student Center. Find more information here.

Sept. 30 — First Principles Tech Talk: From Orbit to the Lunar Surface

Head to the Ion for the first-ever First Principles Tech Talk. This event will feature short talks and moderated discussions geared toward founders, engineers and operators in the commercial space industry. The inaugural event will feature Megan Ortiz and Zach Paugh from Houston-based Axiom Space.

This event is Wednesday, Sept. 30, from 5-7 p.m. at the Ion. Register here.

Momentum is where Houston founders go to break $1 million — apply by Sept. 30

Inside EO

Houston loves a startup story. The harder story, the one that decides whether a company becomes an employer, a brand, and a fixture of the city, is what happens after the start. Most businesses that survive their early years still never cross $1 million in revenue. Fewer than 5 percent ever do. The rest get stuck in the messy middle, somewhere between $250,000 and $1 million, where the owner is still the salesperson, the product, and the back office all at once, and nothing runs without them.

Momentum, the accelerator run by EO Houston, exists for exactly that stage. It is a yearly accelerator for owners and co-founders between $250,000 and $1 million in revenue who are ready to push past seven figures, built around eight months of classes a year and a confidential monthly Forum. Members are invited to go through it for two years: the first pass to build the systems, the second to run them at a higher level, with a new lens and alongside a new cohort.

The next cohort launches in October, with applications open now at eohouston.com/momentum until September 30. Here is the case the chapter makes for joining, point by point.

A curriculum built by operators, not consultants

Momentum's curriculum was built by two operators. Al Danto, an EO Houston founding member who built and exited his own company, is now a Partner at Exit Advisors and a Senior Lecturer in Entrepreneurship at Rice University. He built the curriculum alongside Jacky Fischer, the owner of Houston's 3 Men Movers, who brought a working owner's eye, not an academic one, to how the program is structured. The material covers what actually decides whether a company scales: building systems, hiring and leading a team, and turning an annual vision into 90-day commitments with clear owners.

“Everything in this curriculum got tested inside a real company, either mine or one run by the people who shaped it. If a tool did not survive contact with a real business, it did not make the cut," Danto says.

Momentum is an independent program of EO Houston and requires no university affiliation; faculty and alumni participate as instructors and coaches in their individual capacities. What carries over is the standard: real experience over theory.

EO Houston Momentum classroom A Momentum class in session. Photo courtesy of EO Houston

Entrepreneurs teaching entrepreneurs since 1987

Momentum works because of what sits behind it. The Entrepreneurs' Organization was founded in 1987 on a simple idea: business owners grow fastest alongside peers who have already been where they are going. Today, EO is a global, peer-to-peer network spanning 200+ chapters in over 80 countries, and it runs on a practice called Forum, a small, confidential group of six to 10 fellow owners who meet monthly. Forum members do not give advice. They share experience: what actually happened when they faced the same hire, the same cash crunch, the same decision. Ask EO members anywhere in the world and most will call Forum the single most valuable thing they belong to. Every Momentum member sits in one.

Built for scaling small businesses, not launching startups

Houston's accelerator landscape mostly serves the very early stage: the idea, the pitch deck, the startup swinging for a billion-dollar outcome. Momentum sits in the gap those programs leave behind. It is built for regular companies that are already real, with revenue, payroll, and customers, and an owner who needs help scaling what works into a business that matures. That focus is the point: EO Houston is the place a small business goes to get help growing.

The price is different too. Accelerators usually charge in ownership, a stake in the company in exchange for the program. Momentum takes none. EO Houston is a nonprofit, and the program runs on dues of $3,500 for the year. The outcome the chapter is after is simple: more Houston businesses crossing $1 million, still fully owned by the people who built them.

An on-ramp into Houston's most established founder community

EO Houston counts more than 200 member businesses, every one run by an owner who has already scaled past $1 million, with 75+ chapter events a year. Momentum members plug into that community from day one: the classes, their own Forum, the annual gala, the retreats, the socials. Two years around people who have already done the thing you are trying to do changes what you believe is normal. And when a Momentum member crosses $1 million, the on-ramp becomes a doorway: graduates step into EO Houston membership itself and the global network behind it. The program's full story and curriculum live at eomomentum.com.

Avneesh Oberoi, founder of Oberoi Investments and The DoughCone, walked that path, finishing the program and joining EO Houston in July 2026.

“I truly can say that the experience for the last two years has been life-changing and so memorable… I am also so filled with gratitude to have met so many people open to sharing their experiences and time. It’s made such a difference in how I think, operate, and spend my time and resources," Oberoi says. "I joined with the goal of taking my business I started personally, The DoughCone, and figuring out how to optimize the business and maximize revenue, while navigating a board seat and ownership in a much larger family business on its third generation of ownership… and EO has given me so many tools and experience shares and perspectives I’ve been able to take to both businesses. The growth has been unreal.”

The door swings both ways. EO Houston is opening Momentum to its own members too, owners whose companies average $3 million to $5 million in sales, because the chapter believes the same curriculum and Forum that carry a founder to $1 million keep working well past it.

Sarah Seitz shows how the pieces connect. A former teacher, she founded The Enrichery, a Houston education company offering academic coaching, test prep, and college counseling that has grown to locations across the city. She completed the Goldman Sachs 10,000 Small Businesses program, then joined EO Houston to keep growing. This year, a year after joining, The Enrichery made the Inc. 5000 list of America's fastest-growing private companies. She coached Momentum through its first year, and has since moved from coaching into leadership, helping shape the program's growth from its board.

For owners finishing a program like 10,000 Small Businesses who are not yet at $1 million, Momentum is where the coaching and community continue until they qualify for EO.

Apply by September 30

Momentum's next cohort begins in October 2026, and applications close September 30. The program is for owners and co-founders of Houston businesses doing more than $250,000 a year who are ready to build past $1 million, and now for EO Houston members ready to keep growing. The full curriculum, dues, dates, and FAQ are on the application page. Apply by September 30 at eohouston.com/momentum.

Fewer than 5 percent of businesses make it past $1 million, and there is nothing inevitable about which 5 percent. Houston has the founders. Momentum exists to give them the systems and the peers.

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EO Houston is the Houston chapter of the Entrepreneurs' Organization, a global peer-to-peer network of business owners founded in 1987, with more than 200 member businesses and 75+ chapter events a year. Momentum is an independent program of EO Houston. Rice University faculty and alumni participate as instructors and coaches in their individual capacities.

Tesla proposes Houston-area solar plant & more top innovation headlines

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Editor's note: August proved to be a big month for innovation news in Houston, with big plans revealed by Tesla, the expansion of Apple's Houston footprint, and an update on the MD Anderson-anchored medical center planned for Austin. Below are the five most-read InnovationMap headlines published during the second half of August 2026:

Telsa targets Houston area for new $10 billion manufacturing plant

Electric vehicle and clean energy company Tesla is considering building a new $10.1 billion solar cell manufacturing facility in Fort Bend County, according to documents filed with the Texas Comptroller’s Office. If approved, the plant, called Project Sun City, would be located on a 3,050-acre site off FM 762 and FM 1994 in Richmond, Texas. Tesla aims to finish construction in 2028, with the plant being operational by early 2029. Continue reading.

$5B MD Anderson-anchored Austin medical center to break ground this fall

Construction on the $1 billion first phase of the AI-native University of Texas Dell Medical Center in Austin—which will feature a hospital operated by Houston’s UT MD Anderson Cancer Center—is set to start this fall. The UT System Board of Regents approved funding for first-phase construction on August 12. The medical center—now expected to cost $5 billion, up from the initial $2.9 billion estimate—will span about 2.5 million square feet. It will include 300 to 500 patient beds, outpatient facilities, an emergency department and specialized care for cancer patients. Continue reading.

Tech giant Apple opens Advanced Manufacturing Center at massive Houston facility

Cupertino, California-based Apple Inc. unveiled its Advanced Manufacturing Center in the Houston, marking the completion of the second of three facilities the tech giant plans to launch in the city by the end of this year. The 20,000-square-foot training center will welcome small- and medium-sized businesses for free training and educational sessions to "help accelerate smart manufacturing across America," according to Apple. Apple opened a similar Apple Manufacturing Academy in Detroit last year. Continue reading.

Intuitive Machines lands $600M satellite deal, NASA ‘spacecraft bus’ contract

Houston-based space infrastructure company Intuitive Machines has scored two astronomical deals. The deals add to the company’s soaring success. As of June 30, Intuitive Machines had a record-high $1.8 billion backlog of orders, a $1.5 billion increase from the end of last year. The current backlog includes orders for more than 80 spacecraft. The company, which went public in 2023, expects this year’s revenue to total $900 million to $1 billion. In the first half of 2026, Intuitive Machines generated nearly $393 million in revenue. Intuitive Machines estimates its total available market is valued at more than $150 billion. Continue reading.

Fast-growing Houston real estate startup surges to No. 7 on Inc. 5000

Houston-based Epique Realty has ridden the AI wave to rank among the Inc. 5000’s 10 fastest-growing private companies. With three-year revenue growth of 23,210 percent, the AI-powered real estate brokerage appears at No. 7 on this year’s Inc. 5000 list. Epique, founded in 2021, also ranks as the No. 1 fastest-growing company in Houston, No. 1 fastest-growing real estate company in the U.S., and No. 2 fastest-growing company in Texas. Continue reading.

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