Overview

Game Play 

The object of the Stock Trading Game is to beat the market. 

  • Recommended Minimum # of Players: 20
  • Practice Game: yes (5 minutes)
  • Game Length: 25 minutes
  • Rounds: 2 (total ~ 60 min)

All players start with the same portfolio of four stocks (five shares each) and $200 cash.  The object of the game is to try to beat the market by holding the most valuable portfolio when time runs out, as determined by the liquidation value of the four stocks and any cash leftover. All players must make at least one trade.

Starting Portfolio Value
5 shares of Green @ $40 $200
5 Shares of Orange @ $40  $200
5 Shares of Red @ $40  $200
5 Shares of Blue @ $40 $200
Cash  $200
Total $1,000

Ending/Liquidation Value of Stocks

This video shows how arriving at the underlying value of your stock holdings is key to maximizing the value of your portfolio and beating the market.

Each stock is the sum of 10 playing cards randomly drawn from a double deck at the beginning of the game (automated and hidden from view). The value of each card varies according to the card's numerical value and color (black or red). Below is a summary of how card values are determined:

  • Cards 2-9 are face value
  • Face cards (Jack, Queen, King) equal 10, Aces equal 20
  • Black cards = Card Value x (2)
  • Red cards = Card Value x (-1). Note that all red cards reduce the overall value of a stock since they are negative. 

Example: Assume that Orange stock is composed of the following ten cards.

  • Black cards: J, 9,8,6,4 = 20+18+16+12+8 = 74
  • Red cards: A, Q, J, 8, 2 = -20-10-10-8-2 = -50
  • Thus, Orange's liquidation value = 74 + (-50) = 24

Getting and Using Information

This video shows that correctly evaluating SARs, EPS, and private peeks is the key to winning the Yale Stock Trading Game.

As time elapses, new information (earnings and security analyst reports) become available which may affect the perceived value of a stock. An earnings report, for example, may cause a stock’s value to tumble 40 points. While you may not know the exact value of the stock, this information may lead you to sell your shares on the market in order to reduce your position.
 
Market Opens Time Remaining
1st Security Analyst Report (SAR) 25:00
Green Earnings Per Share (EPS) 20:00
Orange EPS 15:00
2nd SAR 12:00
Red EPS 10:00
Blue EPS 5:00
Market Closes 0:00

Players may choose to purchase "private" information as well. Similar to the real world of public and private information, this may be somewhat helpful, but the true value of the stock can be difficult to ascertain. Value in this game, as in our capital markets, is a matter of opinion.

  • Security Analyst Reports (SARs): Each report reveals the sum of 5 cards + $20 
  • Earnings per share (EPS): One card is deleted, one card is added, and the difference is reported
  • Private Information: For $1, players may "peek" at 3 randomly selected cards (repeatedly with replacement)

Trading

Players can buy, sell, or hold shares of stock through market orders, limit orders, bids, and asks. Players can also take out cash loans and hold negative positions (also known as "short selling").

Learn about the ins and outs of trading, including how to short a stock, in this video.

End of Game

When time runs out, all stocks are liquidated and their true value revealed. A leaderboard shows who successfully beat the market, and who claimed the top spot!

Since liquidation values, earnings reports, and market trades are based upon randomly generated information, every Stock Trading Game unfolds differently. Players may experience an up market, a down market, or anything in between. Playing several rounds of the game affords students the opportunity to practice computing annualized returns.

Game Rules

Individual Play

  • Each player starts with the same portfolio and must trade at least once
  • Players may share information with other players

Buy and Sell Transactions

  • Players may place limit or market orders
  • Players may hold positive or negative (short) positions

Credit Constraints

  • Players can short up to 5 (negative) shares of each company
  • Players can borrow up to $200 @ 10% (negative cash)
  • Players may sell shares (or spend cash) that they don’t own

Game Ends

  • Liquidation values of all 4 stocks are revealed (the sum of each stock's 10 cards)
  • Market (Buy + Hold) value + return is computed
  • Player portfolio value + return + rank is computed
  • Game Leaderboard is presented

Game Sequence

  1. Log into the Stock Market Game using your instructor-provided URL
  2. Click "Join Game"
  3. Starting Position:
    • Each player portfolio includes 5 shares each of Green, Orange, Yellow, and Red stock + $200
    • First Security Analyst Reports are visible for each company
  4. Game Play
    • Trade, purchase private information, manage portfolio
    • Earnings (EPS) reports released at regular intervals
    • Second SAR reports released for each stock
  5. Game End
    • Liquidation values are computed for each stock
    • Market (Buy + Hold) value + return is computed
    • Player portfolio values + returns + ranks are computed
    • Game Leaderboard is presented