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

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

Testing Results: NAEP 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:

Testing Results: NAEP 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: 55 th Percentile (Grades 4-6); 54 th Percentile (Grades 7-10) Non SMG students: 43 th Percentile (Grades 4- 6); 46 th Percentile (Grades 7-10) Improvements in Financial Literacy SMG students: 62 th Percentile (Elementary); 58 th Percentile (MS/HS) Non SMG students: 42 th Percentile (Elementary); 40 th /42 nd 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 – December o Spring – February - April o Late Spring – Mid March - May One year long game Current game dates:

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.

Stock Market Game Basics Advisors need a working address and Internet access to play Transactions are made at the SMG WorldWide site at: or SMG of PA operates on ‘real time’ trading

Stock Market Game Basics 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.

Stock Market Game Basics 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 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 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 shareStocks:

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

In the Classroom: Assessment 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 corporation o 52-week high and low o P-E ratio o Location o Amount of debt o Average number of shares trading daily o Company plans for the future o S&P ranking, etc Worksheets that track the initial purchase, price, broker’s fee, selling price, and profit or loss In the Classroom: Assessment

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 PA 123 Market Street, Selinsgrove PA (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.

Portfolio Value: Long Position *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: = 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 = x = $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.

Portfolio Value: Long Position Per $100 of bond face value Bonds: = Value of Bonds Long Position $ value/100 x price per $100