Stephen A. Ross, Lauded Economist Who Taught at MIT, Dies at 73
(Bloomberg) -- Stephen A. Ross, a prize-winning professor at the Massachusetts Institute of Technology whose work in the field of financial economics provided powerful contributions to both investment management and academic research, has died. He was 73.
He died March 3 at his home in Old Lyme, Connecticut, according to a statement from Darien, Connecticut-based Ross, Jeffrey & Antle, a investment advisory firm he co-founded in 2009. The cause was heart related.
The co-author of an introductory textbook on finance and more than 100 articles, Ross was best known for developing arbitrage pricing theory in 1976. The concept uses macroeconomic factors such as gross domestic product, inflation and investor confidence to identify mispriced assets. APT, as it’s called, is widely used among investment managers.
Another groundbreaking contribution, known as agency theory, describes how the interests of shareholders can differ from those who make decisions on their behalf. The idea involves creating incentives to make it more likely that agents such as corporate executives make decisions desirable to investors, according to a tribute posted on the website of the California Institute of Technology, where Ross was a senior trustee and member of the investment committee.
Ross, who was the Franco Modigliani professor of financial economics at MIT and taught finance at the school’s Sloan School of Management, earned prestigious awards for his work. In 2015 he received the Deutsche Bank Prize in Financial Economics for creating models that have “not only profoundly shaped economic theory but also influenced financial practice and policy during the past 25 years,” Juergen Fitschen, then co-chief executive officer at Deutsche Bank AG, said.
“Steve Ross will be remembered as an intellectual giant,” David Schmittlein, MIT Sloan’s dean, said in a message on the school’s website. “It is difficult to imagine the discipline of modern finance without Steve’s contributions.”
Stephen Alan Ross was born Feb. 3, 1944, in Boston. His parents were Arthur Ross, an executive at an industrial rubber and flooring manufacturer, and the former Betty Grechesky.
Ross received a bachelor’s degree from Caltech, in Pasadena, California, in 1965, and a Ph.D. in economics from Harvard University five years later.
Before joining MIT’s faculty in the late 1990s, he spent 13 years as a professor of economics and finance at Yale University, in New Haven, Connecticut. In the 1970s, he taught at the University of Pennsylvania’s Wharton School, in Philadelphia.
In addition to his academic career, Ross helped start several financial companies, including Roll & Ross Asset Management, an equity money manager based in Blue Bell, Pennsylvania. He was chairman of Compensation Valuation Inc., a New Haven consulting firm that determines the value of employee stock options. Ross also served as an adviser to the U.S. Treasury, the Commerce Department and the Internal Revenue Service.
Other prizes Ross received included the Graham and Dodd Award for financial writing in 1984 and Jean-Jacques Laffont Prize given by the Toulouse School of Economics, in 2007.
Ross and his wife, the former Carol Frost, had two children: Katherine and Jonathan.
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