Kai Nip, Staff Photographer

The Yale School of Management hosted its first Yale Stock Trading Game Competition last month, bringing together over 300 students from around the world to play SOM finance professor Roger Ibbotson’s signature stock trading game.

Ibbotson developed the game in the 1970s to teach students the basics of trading in the stock market. His game has been widely played by SOM students ever since, and Assistant Director for Global Initiatives at SOM Caitlin Donovan said that this competition marks the first time that schools within the Global Network for Advanced Management — a network of 32 business schools across the world — have come together to play the game. 

Each participating school held a practice round in the final week of January and then competed in seven different first-round games. The top third of players from the first round progressed to a final round, which took place on Feb. 17. Seunghee Cho, a student at the European School of Management and Technology in Berlin, took first place in the competition, earning a 43.29 percent return on investment.

“It’s most exciting to have the opportunity to leverage the network in the first place to bring together these students across the world in this friendly and invigorating competition,” Donovan said. “At the end of the day, everyone is in an entirely different time zone coming together to play 30 minutes on the internet together. Without the network that would absolutely not be happening.”

Each participant starts the game with five shares in each of the four fictional companies being traded, as well as $200 in cash. They can then trade shares and purchase additional information about the companies, and whoever has the most valuable portfolio after 30 minutes wins.

Ibbotson explained that the game’s market is self-contained, meaning that for every profitable trade that a player makes, another player is on the losing side. He said that about half of the players outperform the market and half of the players underperform the market.

Every year, Ibbotson has the students in his MBA for Executives class play his game. He said that about one-third of these students come from a background in asset management, but people with this experience do not perform significantly better in the game.

“What I do find is that people in asset management trade more,” Ibbotson said. “The other difference is between men and women. I find that men trade more than women. They don’t do better, they just trade more.”

He said that trading more tends to indicate overconfidence in one’s ability to beat the stock market, and that men tend to be more overconfident. Sometimes it pays off, he said, and men tend to be at the extremes, while women’s performances tend to cluster in the middle of the pack.

When Donovan first played the game, she had little market experience and called herself a “beginner-level trader.” She added that the game is easy to play at any experience level.

“Up front, you can play with any amount of knowledge,” she said. “And then as the game progresses, it sort of weeds out the weaker players, which is the way the markets work anyway. So it really does simulate the market.”

Going in as a beginner, Donovan said that she was both “paralyzed” and “excited.” She said that being able to participate firsthand is much more engaging and rewarding than reading about sales and trading or watching an educational video.

According to Ibbotson, the game teaches students directly about the mechanics of the market. He explained that this includes learning about market orders, leverage, short-selling, and borrowing money, as well as how information about companies factors into stock prices.

Each 30-minute game simulates approximately one year of the stock market, Ibbotson said.

“It’s a quick way to have a lot of action,” he said. “In a lot of other trading games they set up for people, you buy real stocks or something and then over the course of a semester you see what happens to your real stocks. … It’s all right for creating portfolios, but it’s not great at measuring performance, whereas here you can play a whole game and it’s like a year.”

When Ibbotson first invented the game, it was not electronic and had to be played in person. While it has been online for many years now, Donovan said that the SOM’s Case Research and Development Team and the University IT department’s Custom Application Development team worked jointly throughout the fall to strengthen the website and enable it to be accessed from around the world.

Gregory MacDonald, a multimedia producer in the SOM’s Case Study Research Group, said that the competition ran very smoothly, despite a few brief issues with internet connectivity in China and England. Due to the nature of the game, it must be played live with stable access to the internet.

“I think the most interesting aspect was how quickly some groups of students learned that sharing information amongst themselves could be a productive strategy,” MacDonald wrote in an email to the News. “Professor Ibbotson encourages players to communicate with each other, but we’ve always approached the game as essentially an individual’s game and not a team sport. The tournament has shown that in a competitive setting, at least, that’s not always the case.”

The Global Network for Advanced Management was launched in 2012 to connect students and resources from diverse regions of the world, under the direction of former SOM Dean Edward Snyder.

Julia Brown | julia.k.brown@yale.edu 

JULIA BROWN
Julia Brown currently serves as a University Editor for the Yale Daily News. She previously covered the University's professional schools, including the Yale Law School and School of Management. She is a junior in Jonathan Edwards majoring in Economics & Mathematics and is originally from Princeton, New Jersey.