Transcript Stock Market Game Workshop

National Council of Economic Education
Carolyn Shirk
Vice President
849 Tame Deer Drive
Winfield, PA 17889
Cell: 570-975-5149
Sponsored By:
Welcome & Introductions
Who we are….
 ECONOMICSPennsylvania at
www.economicspa.org
 NCEE at www.ncee.net
 SMG Advisors
First National Bank
Center for Economic
Education
Stock Market
Game
Program
Teacher Survey Findings
90% said that students were encouraged
to learn more about the curriculum
being taught with the SMG Program.
94% agree that the SMG Program helps
them teach basic academic skills such
as math, language arts, and social
studies, in exciting ways.
Teacher Survey Findings
96% agree that the SMG Program
increases students’ ability to apply basic
skills to life decisions.
98% found that their students’
understanding of the importance of
saving and investing improved using
the SMG Program.
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
 creates interest in current events
What Teachers like about SMG
 teaches economic concepts
 sharpens skills in mathematics,
especially in fractions and basic
computations
 incorporates easily into most classes
 Is FUN!
What is the
Stock Market
Game Program
(SMGP) ?
History of the Game
 Started in the late 1970’s by a University of
Buffalo professor
 Over 500,000 students compete nationally
each year and over 40,000 students in
Pennsylvania compete each year
 Nationally sponsored by the Foundation for
Investor Education
 EconomicsPennsylvania is the licensed
distributor of the Stock Market Game
Program in PA
Administrative offices and support of
SMGP of PA provided by Temple
University Fox School of Business and
Management
Stock Market Game
Interdisciplinary
Applications
SMG Interdisciplinary
Benefits
Language Arts: Research,
Vocabulary, Presentations, Reading
Comprehension
Social Studies: Current Events,
Government Policy, Economic Concepts,
Cultural Issues, History of our Economy
SMG Interdisciplinary
Benefits
Business Education: Consumer
Spending, Decision Making, Record
Keeping, Financial Planning
Mathematics: Fractions, Decimals,
Percentages, Ratios, Basic Computation
Technology: Spreadsheets, On-line
Research, Presentations, Word
Processing
Stock Market
Game Basics
SMG Basics
 Real-time stock market simulation
 Played on the internet from any
computer
 The game runs for ten weeks in the
fall, spring, and late spring. A new
whole year game is also available.
SMG Rules
 Transactions are made at the SMG
WorldWide site at: www.smgww.org
 Trades are processed in 5 – 20
minutes
SMG Basics
 Each team begins with a
hypothetical $100,000
 Teams should have one to five players
SMG Basics
 Teams may buy, sell, short sell, or short
cover their stocks
 Invest in common stocks, mutual
funds and ETFs traded on the three
major exchanges: American, New
York, and NASDAQ Stock Exchanges
SMG Basics
 A 2% brokers fee is charged for each buy
or sell – limits day trading issue
 Stocks valued at less than $5.00 per
share may not be bought
 Teams may borrow up to $100,000 to
purchase stocks on margin -- interest is
charged
SMG Rules
 Stock and cash dividends and splits
are automatically computed into team
portfolios
 Portfolios are updated and available on
a daily basis
 Rankings are updated every weekend
 Teams will not appear in the rankings
until a trade is made
SMG Rules
 2% annual rate of interest is earned
on cash balance
 7% annual rate of interest is paid on
negative cash balances (borrowed
money)
 Trades are made based on prices
at time of order (market order).
 Trades entered after 4:00 p.m. will
are made at the next day’s
opening price.
 You may trade only stocks and
mutual funds that have traded within
the last 7 days.
SMG Basics
 Portfolios are not liquidated at the end
of the game and should not be
liquidated at the end of the game
 The team with the highest portfolio
equity at the end of the game wins
 Portfolio equity in the tenth week is
used for final rankings
How Does the
Competition
Work?
Teams compete within
a geographic region
and on six levels
SMG Levels
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Grades 4-6
Grades 7-8
Grades 9-12
Post-Secondary
Youth Groups
Adult
General
Information
General Information
Buying:
 Must be for a minimum of 100
shares
 May set a maximum purchase price
limit
 Called a “Long” position
 Ticker symbols are available online
General Information
Buying:
 No “penny” stocks
 Must have closing price of at least
$5.00 per share
 Most brokers will not allow margin
purchases of stocks below $5.00
General Information
Selling:
 Must already own the stock
 Must be for a minimum of 100
shares (unless selling the only
remaining shares)
ex: If you bought 120 shares, then sold 100, you
may then sell the remaining 20.
 May set a minimum selling price
limit
Setting a “limit” price
 A limit order is an order that sets the maximum or
minimum at which you are willing to buy or sell a
particular stock.
 you want to buy stock ABC, which is trading at $12,
you can set a limit order for $12.50. This
guarantees that you will pay no more than $12.50 to
buy this stock.
 you own stock ABC and it is trading at $15, you could
place a limit order to sell it at $14.50. This
guarantees that the stock will be sold at a price
greater than or equal to $14.50 but not below.
 Best for overnight or weekend trades. The limit trade
is executed only once.
General Information
Please Note:
For real time trading price limits are
generally not needed except for trades
entered after the market close.
General Information
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
General Information
Short Covering:
 Must have already short sold the
stock
 May set a maximum price limit
 All other rules for selling apply
General Information
Example: Short Selling and Covering
I feel that IBM stock is going to go
down and want to short sell the
stock.
 I am borrowing the stock from the
broker (2% brokerage fee) and
selling it. Now I’ve got cash.
General Information
Example: Short Selling and Covering

When stock price is at its lowest, I short
cover by buying the stock back in the stock
exchange at the low price and returning it
to the broker (2% brokerage fee). I keep
what I didn’t spend.

I get the difference between the high price
and the low price minus the brokerage
fees.
General Information
Long Positions:
A Long Position is a stock you
own.
Ex: If a team owns 100 shares of
McDonalds, their long position
is 100 shares.
# of shares
X current price per share
= Value of Long Position
General Information
Short Positions:
A Short Position is a stock you
borrowed from the broker and
sold
# of shares
X current price per share
= Value of Short Position
General Information
Equity:
Total Value of Long and
Short Positions
+ Cash Balance
= Equity
General Information
Buying on Margin:
 You may borrow funds using the
stock in your portfolio as collateral
for the loan
 Interest charged at 7%
Borrowing on Margin
 At the beginning of the game, teams have
$200,000 of purchasing power, 50% of which is
collateralized by your initial cash portfolio of
$100,000
 50% of value of long and short position is required
as collateral (margin requirement)
Initial Margin Requirement = 50%
 Margin requirement is subtracted from Equity
 Remainder is matched dollar for dollar for total
buying power
Margin Call:
If the Total Equity in your portfolio falls below
30% of the value of your long + short
positions, your team will receive a “margin
call”.
SMG will automatically liquidate a portfolio
that falls below the 30% rule until the
minimum margin requirement of 30% is met.
SMG Assessment Ideas:
 ARTICLES from web,
newspapers or magazines on
corporations
 NOTES that state why
 GLOSSARY of terms with
definitions
SMG Assessment Ideas:
 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
 GRAPH showing changes in the
value of a stock
SMG Assessment Ideas:
 BASIC DATA about a corporation
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52-week high and low
P-E ratio
Location
Amount of debt
Average number of shares trading daily
Company plans for the future
S&P ranking, etc
 WORKSHEETS that track the initial
purchase, price, broker’s fee, selling price,
and profit or loss
Suggested 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
Team Roles
Economic Research Coordinator
 Researches fundamental economic data:
current events, overall economy...
 News about industries
 Provide reports to team
Record Keeper, Transaction Reporter,
Charter, and more....
SMG Costs
Team Fees: 10 Week Games:
Grades 4-12
College
Youth Groups
Adult or Yearlong
$15
$15
$18
$25
Team Fees: Year Long Game:
All groups
$25
New Advisor Fee: $25 Eliminated
What if I need
help during the
game?
1-800-722-6708
[email protected]
Pat Schoeniger
AVP - Stock Market Game
Carolyn Shirk at [email protected]
or call 570-975-5149
Investment
Basics
Investment Basics
Stock Market
IQ Quiz
Investment Basics
True or False
1. Stocks are items found in the
storeroom of a grocery store.
2. Only rich people invest in the stock
market.
3. Most stocks on the stock market are
sold by the United States
Government.
4. If the stock market goes up 30
percent one year, it will fall by 30
percent in the next year.
Investment Basics
5. Any stock that goes up in price must
eventually come back down.
6. Bears, Bulls, and Pigs are found in the
stock market.
7. Stock prices are set by the Securities
and Exchange Commission, a
regulatory agency of the U.S.
government.
8. Stock markets are open on business
days around the clock, around the
world.
Investment Basics
9. Sometimes companies buy their own
stocks on the stock market.
10. It is hard to buy a good stock today
because all the good ones have
already been purchased.
11. Buying stocks is a sure way to make
money.
12. Corporations sell new issues of stock
on the New York Stock Exchange.
Investment Basics
13. “Insider” stock trading means that
trading stocks takes place inside a
building.
14. People can buy stocks on the
internet.
15. When the stock market goes up, it
causes the economy to grow.
From Learning from the Market, © National
Council on Economic Education, New York,
NY
Investment Basics
Different Types of Investments:
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Insured Savings Accounts
Savings Bonds
Certificates of Deposit
Treasury Bonds
Corporate Bonds
Mutual Funds
Stocks
ETFs
Collectibles
Commodities
Investment Basics
The RISK to RETURN
Relationship:
The RISKIER the
Investment The HIGHER the
Return
Investment Basics
The Difference Between Stocks, Bonds, and Mutual
Funds
Stocks:
You own a piece of the company
You make money if the company does well
Bonds:
You loan money to a corporation or government
You earn the interest
Mutual Funds & ETFs:
You own one portion of a collection of stocks,
bonds, or other securities
Investment Basics
The Three Main Markets:
NYSE:
New York Stock Exchange Oldest, largest,
best-known stocks
NASDAQ: (National Association of Securities
Dealers Automated Quotations) Large, midsized, and small growth companies
AMEX:
American Stock Exchange Mid-sized growth
companies
Investment Basics
The Difference Between Large and
Small Companies:
Large:
 Often have high prices
 Low risk of failure
 Some pay regular dividends
Small:
 Potential for growth is greater
 Generally prices are lower
Investment Basics
Common Stocks:
 Pay dividends based on performance of the
company
 Have higher risk but may have higher
reward
Preferred Stocks:
 Dividend amount is preset
 Dividends are paid on preferred stocks
before common stocks
 Have lower risk but may limit reward
Over-The-Counter Stocks
 A security which is not traded on an
exchange, usually due to an inability to meet
listing requirements. For such securities,
brokers/dealers negotiate directly with one
another over computer networks and by phone.
The NASD carefully monitors their activities.
 Be very wary of some OTC stocks, the OTC:BB
(Bulletin Board) stocks are either penny stocks or
may hold bad credit records.
Investment Basics
Stock Splits:
 More shares are created at a lower
price per share
 Stockholders profit if stocks go up
 Indicated with an (s) in the paper
Ex: Dell $109  $54
Mutual funds
 Closed-ended funds may be traded
just like the stocks traded on the
NYSE, NASDAQ and American Stock
Exchanges.
 Open-ended mutual funds can also
be traded but cannot be short sold or
short covered.
Open vs Closed-end Funds
 An open-end fund issues and redeems shares
on demand, whenever investors put money
into the fund or take it out. There's no limit to
the number of shares the fund can issue. Nor
is the value of each individual share affected
by the number outstanding, since net asset
value (NAV) is determined solely by the
change in prices of the stocks or bonds the
fund owns, not the size of the fund itself.
 For a closed-end fund, the share price is
determined not by the total value of the
assets it holds, but by investor demand for
the fund (like an ETF).
Gumpper – SMG
Investment Basics
Other Terminology:
Blue Chips
the largest and most
profitable stocks
Bull Market
a market that is rising
Bear Market
a market that is falling
Investment Basics
Why long term
investing is the
best route?
Investment Basics
DJIA over last 33+ years:
Investment Basics
What stocks should I buy?
P/E or Price-Earnings Ratio
 Trailing P/E: Latest closing price of the
stock to the latest available annual
earnings per share of the firm.
 More earnings per share given stock
price results in a lower PE ratio and a
better buy.
 Forward P/E: based on forecasting net
year’s future expected earnings.
Investment Basics
What stocks should I buy?
PE Ratio
Example:
 ABC Stock – 20 P/E Ratio
 Indicates that ABC is selling for 20 times
the company’s earnings
PE Ratio
 So, if more earnings per share given the stock price
results in a lower PE ratio and a better buy.
 Is Toyota or Apple the better buy?
 Apple: Selling at 40 times earnings.
 Toyota: Selling at 9 times earnings.
Beta: a measure of volatility
•Beta = % change in stock return / % change in market
return.
•Beta = 1 means that the stock and market change by the
same percentage.
•Larger beta means a larger change than the market on any
given day.
•Positive and negative betas show direction of stock relative
to market
Gumpper – SMG
Where to get more information
American Stock Exchange- www.amex.com
NASDAQ- www.nasdaq.com
NYSE- www.nyse.com
CNNfn- www.cnnfn.com
CNBC- www.cnbc.com
EDGAR Database of Corporate Informationwww.sec.gov/edgarhp.htm
 Yahoo! Finance- http://finance.yahoo.com
 Google Finance - http://finance.google.com/finance
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Criteria for Selecting Stocks
 EPS: Earnings per share
 P/E Ratio
 ROE: Return on Shareholders’ Equity
 Beta
 5-year Sales and Earnings History
 Company Size
 Relative Industry Strength
How to Read the
Stock Market Page
BBA
CCI
LLY
XYZ
76
64
16
10
/
/
/
/
26
9
7
62
=
=
=
=
$2.92
$7.11
$2.28
$0.16
Stock Table
52 Week
High
52
Week
Low
Stock
Div
Yield %
P/E
Ratio
Sales
100s
EPS
High
Low
Close
Net
Change
49
39
ABC
1.30
3.25%
20
3314
2
40
39
40
----
80
49
BBA
.40
.53%
26
73016
2.92
77
75
76
+1
66
38
CCI
1.20
1.87%
9
77723
7.11
66
63
64
+1
18
13
LLY
1.78
11.12%
7
13101
2.28
16
16
16
----
13
8
XYZ
----
62
6
.16
10
10
10
-1
0%
52 Week High/Low
 Highest and lowest price a share of the
stock has sold for in the past 52 weeks.
 Example ABC: High was 49
 Example ABC: Low was 39
Stock
 Varies by Newspaper
 Either company abbreviation
or ticker symbol
 In A-Z order
Div
 Annual Dividend per Share of
Stock
 Based on the rate of the Last
Quarterly Payout
 Annualized Data
 Example ABC: $1.30 per share
 Example: XYZ: $0 per share
Yield Percentage
 Known as Dividend Yield
 A Measure of the Income Produced
by the Stock
 Is the Amount of the Dividend
divided by the Price of the Stock
Yield Percentage
 Achieved by Dividing the Annual
Dividend by the Day’s Closing Price
 Example: ABC 1.30/40 = .0325
or as a percentage: 3.25%
P/E Ratio
 PRICE- EARNINGS RATIO
– Ratio: latest closing price
of the stock to the latest available
annual earnings per share of the firm
– Trailing P/E: is what is reported in the
financial section of newspapers
– Forward P/E: based on forecasting net
year’s future expected earnings
P/E Ratio
 Example: ABC – 20 P/E Ratio
– Indicates that ABC is selling for 20
times the company’s earnings
Example: XYZ – P/E Ratio is 62
– Indicates that XYZ is selling for
62 times the company’s earnings
Sales 100s
 This represents the volume of
transactions on the trading day
 Bought or Sold
 Presented in hundreds, simply multiple by
100
Example: ABC – 3314
Indicates that 331,400 shares traded
High/Lows
 This represents the highest and
lowest selling price of the stock
for the day.

Example: ABC – high of 40
low of 39
Close
 This represents the price of the last stock
sold for the day

Example: ABC – closed at 40
Net Change
 This lists the net change between
the closing price for the stock for
the day and the closing price on the
previous trading day

Example: BBA: Today’s Close: 76
Net Change: + 1
Previous Day: 75
Earnings per Share
 A means of valuing common stock.
 Part of a firm’s profit that is
allocated to each outstanding
share of common stock.
 Can be a good indicator of fiscal health
Earnings per Share
 Many investors carefully watch
this number
 In general, higher earnings per share
means better dividend and overall
stock performance.
Earnings per Share
 Calculated by dividing the
closing price on the day being
consider by the P/E ratio.
Example:
Today’s Close
40.00
P/E Ratio
20
Earnings per Share:
ABC – $2.00
Economics and the
Stock Market
Micro vs. Macro economics and the
Stock Market
Microeconomics
Microeconomics studies the behavior of
the consumer, household, or firm.
 Scarcity and choice
• How do we allocate our budget, time?
• How do firms allocate resources to produce
goods and services?
 Maximizing well being, happiness
 Maximizing profit
 Efficiency
Micro and the Stock Market
 Look at one company:
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How does this company make its product?
Who buys the product?
Does the company have good managers?
Who supplies the company?
 Look at one industry:
 How much competition is in the industry?
 Is the industry young or old?
This is what stock brokers and
mutual fund managers get paid to do!
Applications:
Industry Research
BusinessWeek Blog
Marketplace
Google Finance
MAC Vs PC
Macroeconomics
Macroeconomics studies the economy
as a whole or as aggregates and
attempts to predict or forecast changes
in national output, unemployment, and
inflation.
Macro and the Stock Market
 Look at the whole economy:
 Inflation: Producer and Consumer
Price Indices (PPI & CPI)
 Unemployment: Unemployment
rate
 Interest rates: actions of the Fed
 Productivity
 Use information to estimate good
times to buy equities and times
to sell.
Applications:
BLS
Economagic
Fed 101
U.S. Department of Labor
Bureau of Labor Statistics
“Economy at a Glance”
http://www.bls.gov
When is the news good?
Example: decrease in the
unemployment rate:
 Good: sign of a growing economy 
increased consumer spending 
increased profits.
 Bad: indication of future labor shortages
 increasing wages  inflation  fed
increases interest rates  decrease
profits, slow growth.
Going public
Going Public:
From a Good Idea to a Corporation
 Product idea: on-line financial services
including banking, investments,
retirement planning, estate planning,
legal services, etc.
 Need funds to start business - find
investors “venture capitalists.”
 Each investor owns a stake or “share”
of the corporation and has limited
liability.
Going public
Going Public:
From a Good Idea to a Corporation
 Suppose the company is doing well.
You need more money - go public,
“initial public offering”
 Going public: investment bank
creates a prospectus and buys all
shares of stock and resells them at a
set price to the public
 A “tombstone” is the public notice of
an IPO
Important Points for Students at
the End of the Game
Diversification is critical
 Size of company, industry, culture and
more
Mutual Funds or getting professional
advice
Investing is a Long-Term Proposition
Stock Market Game
Team Registration
Online Pre-registration
Gumpper – SMG
Registering SMG Teams
 Register online at www.smgww.org
 Complete and mail the payment form
(online PDF) to SMG of PA Headquarters
www.smgww.org
Payment Form
• Click on “PREREGISTER NOW”
Choose this
option when you
are ready to preregister your
teams.
For Free
Promo,
complete all
fields in bold.
FREE
Pre-registration Reminders
 You can print out the payment form (online) to
use for obtaining a PO # from your school (there
is also one in the packet)
 If you submit a PO# with your online preregistration, team #s and passwords will be
generated right away, otherwise SMG will wait for
the check.
 Your teams will earn interest on cash before the
game begins
 Free adult game as part of new advisor packet.
Gumpper – SMG
Playing the
Stock Market Game
Online Demo
www.smgww.org
Login into SMG WORLDWIDE
Inside SMG WORLDWIDE (Team Pages)
 The blue Trading tab contains all the functions necessary to
compile research and make trades.
Account Summary
This team has used
some of its “margin”
“Min Maintenance” is 30% of the team’s
long + short value. If the teams total
equity were to fall below this number,
they would receive a margin call.
 Check Account Summary and Transaction Notes for the status of
your account balance and the trades you have entered.
The math…..
140,710 / (281,420 + 0) = 50%
146,560.56 – 140,710 = 5,850.56
84,426 / (281,420 + 0) = 30%
Account Holdings
“Short Sell” and “short cover” are the
transactions used when taking a “short” position
on a stock. A short position earns a positive
return when the stock price falls.
Enter a Trade