implementing the stock market game

Implementing the Stock Market Game

Professional Development Workshop

What is the Stock Market Game?

An on-line simulation of Wall Street trading that provides a framework for teaching students about the American economic system.

Designed specifically for classroom use to help students understand the stock market, the costs and benefits of investing, the sources and uses of capital, profit and loss, and many other related economic concepts

History of the Game

• Started in the late 1970’s by a University of Buffalo professor

• Over 750,000 students compete nationally each year and over 40,000 students in Pennsylvania compete each year

• Nationally sponsored by the SIFMA Foundation

Stock Market Game of Pennsylvania

• EconomicsPennsylvania is only licensed distributor in Pennsylvania

• Recognized as Top 10 Premier Partner by SIFMA

Statewide Coordinator: Patricia Schoeniger

[email protected]

1-800-722-6708

What Teachers Like About SMG

• Generates enthusiasm in hard-to-motivate students

• Helps meet educational standards across many required disciplines

• Combines the spirit of competition with learning

• Promotes cooperation and group autonomy among students

What Teachers Like About SMG

• Creates interest in current events

• Teaches economic concepts

• Sharpens skills in mathematics

• Incorporates easily into most classes

• Is FUN!

SMG Research: Testing Results

• National Assessment of Educational Progress (NAEP)

• Jump$tart• Learning Point Associates (LPA)• Full reports available on

EconomicsPennsylvania web site

Testing Results: NAEP

• 14 point or 9.8% increase.• Students who participated in a stock market simulation

mean grade = 160• Students who had no exposure to stock market simulation

mean grade = 146


• FBLA• DECA• Junior Achievement• Economics-related clubs• Academic competitions• Stock market game or simulation• Student managed store• Student managed credit union or

bank.

As compared to other economics related activities:


Other significant factors • writing long answers to questions• using the Internet at least once a week

to gather economic data• inclusion of a required economics test

or economics questions on a broader test.

Testing Results: Jump$tart

2008

Testing Results: LPA

• Fall of 2008• Nationwide randomized controlled trial • Measured the impact on student performance in mathematics and financial literacy.

The Stock Market Game positively affected student academic performance.

Testing Results: LPA• Improvements in Mathematics performance

• SMG students: 55th Percentile (Grades 4-6); 54th Percentile (Grades 7-10)

• Non SMG students: 43th Percentile (Grades 4-6); 46th Percentile (Grades 7-10)

• Improvements in Financial Literacy• SMG students: 62th Percentile (Elementary);

58th Percentile (MS/HS)

• Non SMG students: 42th Percentile (Elementary); 40th/42nd Percentile (MS/HS)

Testing Results: LPA

Other findings:• Student achievement increased regardless of how teachers implemented The Stock Market Game.

• Teachers of The Stock Market Game report that the program influenced their financial practices.

Interdisciplinary Applications

Social Studies: Current Events, Government Policy, Economic Concepts, Cultural Issues, History of our Economy

Language Arts: Research, Vocabulary, Presentations, Reading Comprehension

Interdisciplinary Applications

Business Education: Consumer Spending, Decision Making, Record Keeping, Financial Planning

Mathematics: Decimals, Graphs Percentages, Ratios, Basic Computation

Technology: Spreadsheets, On-line Research, Presentations, Word Processing

PA Standards Alignment

Alignment to PA Academic Standards available on EconomicsPA web site.•Economics•Social Studies•Math•Language Arts•Science and Technology•Career Education and Work

Stock Market Game Windows

• Available games: • 3 ten week periods o Fall - October – Decembero Spring – February - April o Late Spring – Mid March - May

• One year long game

• Current game dates: www.economicspa.org

The Competition: Levels

• Grades 4-6

• Grades 7-8

• Grades 9-12

• Post-Secondary

• Youth Groups

• Adult

The Competition: Regions

• Fall, Spring and Late Spring teams also compete within a geographic region.

• Regions are identified by EconomicsPennsylvania Centers for Economic Education service areas.

EconomicsPennsylvania Regional Map

• Note: year long game levels are statewide.

Stock Market Game Basics

• Teams of students make investment trades to manage portfolios throughout the game.

• 3-5 players per team recommended.

• Each team begins with a hypothetical $100,000.

• Stocks, bonds and mutual funds are available for trading.


• Advisors need a working Email address and Internet access to play

• Transactions are made at the SMG WorldWide site at: www.smgww.org or http://stockmarketgame.org/

• SMG of PA operates on ‘real time’ trading


• Teams may borrow up to $100,000 to purchase stocks on margin – 7% interest is charged

• The team with the highest portfolio equity at the end of the game wins. Portfolios are not liquidated at the end of the game.


• Trades are processed within 15 – 20 minutes

• Portfolios are updated overnight and available on a daily basis

• Rankings are updated every weekend

Trading Stocks

• Teams may buy, sell, short sell, or short cover their stocks.

• A 2% brokers fee is charged for each transaction

• Stocks valued at less than $5.00 per share may not be bought.

Trading Stocks

• 2% interest is earned on cash balance.

• Common stocks listed on the American, New York, and NASDAQ Stock Exchanges may be traded.

• Stock dividends and stock splits are automatically computed into team portfolios

Trading Stocks

• Stock ticker symbols are used and can be looked up on the game pages

• Trades entered after 4:00 p.m. will be processed at 9:35 a.m. the following day.

• Rogue Stock Rule: If a stock has not been traded for seven days it will not be accepted and will not be permitted to be traded even though it is on the three major stock exchanges.

Buying Stocks

• Must be for a minimum of 100 shares

• Must have a price of at least $5.00 per share

• May set a maximum purchase price limit for stocks

Selling Stocks

• Must already own the asset

• Stock and mutual fund sell orders for less than 100 are permitted.

• May set a minimum selling price limit for stocks

Please Note: For real time trading price limits are generally not needed except for trades entered after the market close.

Short Selling

• Short selling starts with borrowing a stock from your broker

• You sell the borrowed stock hoping to buy it back at a lower price and return (short cover) it to your broker for a profit

• All rules for buying still apply

Short Covering

• Must have already short sold the stock

• May set a maximum price limit

• All other rules for selling apply

Example: Short Selling and CoveringExample: Short Selling and Covering

• I borrow the stock from the broker (2% brokerage fee)

• I sell it. Now I’ve got cash.

• I short cover by buying the stock back in the stock exchange at a lower price

I feel that IBM stock is going to go down and want to short sell the stock.

Example: Short Selling and CoveringExample: Short Selling and Covering

• I return the stock to the broker (2% brokerage fee).

• I get the difference between the high price and the low price minus the brokerage fees.

Note: it’s important to remember that you borrow the stock from a broker and return the stock. You do not give the broker any money (except for brokerage fee).

Portfolio Value: Long Position

A long position is an asset you own.

= Value of Long Stocks

# of shares

x current price per share

Stocks:Stocks:

Portfolio Value: Short Position

• Appears as a minus (-) to indicate a debt

• Held short sell positions are marked to the market daily and the resulting gain or loss is added or subtracted from cash.

# of shares stock/closed mutual fund

x current price per share

= Value of Short Position

A short position is an asset you owe.

Portfolio Value: Equity

= Total Equity

Total Value of Long Position• Stocks• Mutual Funds• Treasury/Municipal/Corporate

Bonds

+ Cash Balance

Additional Information: Interest

• Credited weekly on positive cash balances at an annual rate of 2%

• Charged weekly on negative cash balances at an annual rate of 7%

• Interest is calculated daily, summed for the week (Saturday through Friday) and posted on the following Tuesday.

• Daily rate is based upon a 365 day year.

Additional Information: Borrowing

• Teams may borrow funds to buy stock – called ‘buying on margin’

• Uses ½ the holdings in the portfolio as collateral for the loan

• Initial margin requirement (50% of Long Position) is subtracted from equity

• Remainder is matched dollar for dollar for total buying power

• 50% of Stocks & Mutual Funds

• 40% of Treasury Bonds

• 10% of Municipal Bonds

• 25% of Corporate Bonds

Additional Information: Borrowing

Formula for Initial Margin Requirement

In the Classroom: Assessment

• Articles from newspapers or magazines on corporations

• Notes that state why

• Glossary of terms with definitions

• Letters to corporations requesting information


• Headlines with a brief paragraph explaining the impact the story will have on the market

• Journal of TV coverage of market activities

• Bibliography of readings

• Graphs showing changes in the value of a stock

• Basic Data about a corporationo 52-week high and lowo P-E ratioo Locationo Amount of debto Average number of shares trading dailyo Company plans for the futureo S&P ranking, etc

• Worksheets that track the initial purchase, price, broker’s fee, selling price, and profit or loss


In the Classroom: Team Roles

• Entire Team• Research all holdings• Identify possible stocks• Collect company information• Give rationale for making a trade

• Captain• Conduct team meetings

• Determine consensus

• Enter transactions on game site

In the Classroom: Team Roles

• Secretary/Recorder• Track the prices of all stocks owned by the

team• Record the Dow Jones closing average on a

line graph

• Treasurer• Keep accurate record of all transactions

• Balance portfolio account

• Print and provide portfolio reports to team

SMG Costs: Teams

Team Fees: 10 Week Games:

Grades 4-12 $15

College $15

Youth Groups $18

Adult $25

Team Fees: Year Long Game:

All groups $25

SMG Costs: Resource Packet

Teacher Resource Packet available for purchase ($40):•Beyond the Market•Your Guide to Understanding Investing •Market Mechanics CD Rom•Classroom materials

Send check to SMG of PA123 Market Street, Selinsgrove PA 17870(Note SMG Teacher Packet on check)

Trading Mutual Funds

• Closed and Open ended mutual funds may be traded just like stocks on the three exchanges.

• No short sell or short cover

• Mutual fund dividends are automatically computed into team portfolios

Buying Mutual Funds

• Must be for a minimum of 100 shares

• Must have a price of at least $5.00 per share

• May set a maximum purchase price limit for stocks

Selling Mutual Funds

• Must already own the asset

• Stock and mutual fund sell orders for less than 100 are permitted.

• May set a minimum selling price limit for stocks

Please Note: For real time trading price limits are generally not needed except for trades entered after the market close.


*Net Asset Value is computed once a day at the end of the day based on the value of the securities in their portfolios.

Mutual Funds:Mutual Funds:

= Value of Mutual Funds Long Position

# of shares x current price per share (NAV)*

Trading Bonds

• Bond interest payments are automatically computed into team portfolios

• Bond numbers assigned by the game are looked up on the game pages

Trading Bonds

8,000 Bonds available:•Corporate•Municipal (state only)•Treasury

AXXXX.YYNN.N

Seq #T M or C

Maturity Year

Annual interest rate

Buying and Selling: Bonds

• Maturity dates no shorter than 5 years

• May not be short sold

• Daily feed of pricing from S&P using previous day’s prices

Buying and Selling: Bonds

Bonds are priced per $100 of bond principal.

Cost of $4,000 bond with a price of $99.50:4000/100 = 40 40 x 99.50 = $3,980+ accrued interest + commission

For all Bond Sell Transactions the SEC Fee of 5.6 cents per $10,000 trading amount is always added.


Per $100 of bond face value

Bonds:Bonds:

= Value of Bonds Long Position

$ value/100

x price per $100

1-800-722-67081-800-722-6708

[email protected]

implementing the stock market game

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