By Gwen Kinkead

The game Yale School of Management Professor Roger Ibbotson invented to teach the basics of market trading has gone global. 

On February 17, the Global Network for Advanced Management announced the winners of its first annual Yale Stock Trading Game Competition. Three hundred and six students at twelve Global Network schools across eight time zones competed over several weeks to see who was best at constructing the most valuable portfolio.

Seunghee Cho of ESMT Berlin traded her way to the top. “An unforgettable experience for me,” Cho said. “My heart was bouncing all the time during the game.” A native of South Korea, the first-year MBA candidate is president of ESMT's investment club and has traded on stock markets for over a decade. A former manager at Hanwha Systems, part of the Hanwha Group conglomerate, Cho scored a 43.29% return on investment (ROI)  in the final, well out-distancing the market return of 0.5%. She aspires to become a CFO. 

Andrea Bortolini of Milan’s SDA Bocconi School of Management (Italy) took second place with a 41.7% return. The first-year finance student had never before played a stock trading game. Bortolini is 22 years old and plans to work in investment banking.

Tony Gao from the Renmin Business School in Beijing scored third highest. Gao said, “My strategy was to guess a company’s original value with private information and focus on the EPS change, considering long-term and short-term goals.” Gao has an engineering background and is a first-year IMBA student.

Ibbotson, a professor in the practice emeritus of finance at Yale SOM, presented the medalists with an award certificate in a Zoom ceremony. “Today’s final game featured over 80 of the top players trading with each other across the globe. Even though all of you have proven to be good players, you discovered how hard it is to beat the market against players who have similar skills,” Ibbotson observed.

The medalists represented three of the 12 schools whose students played the game. Players also came from the UBC Sauder School of Business (Canada); Yale School of Management (United States); Saïd Business School, University of Oxford (UK); Lagos Business School, Pan-Atlantic University (Nigeria); Koç University Graduate School of Business (Turkey); Indian Institute of Management Bangalore (India); Asian Institute of Management (Philippines);  Fudan University School of Management (China); and  Hitotsubashi University Business School, School of International Corporate Strategy (Japan). 

The tournament was overseen by Caitlin Donovan, the Yale School of Management’s assistant director of global initiatives, and Greg MacDonald, a multimedia producer for Yale SOM‘s Case Research and Development Team. The two tournament leads coordinated preliminary games across eight time zones, certified the finalists, troubleshot technical difficulties, set up the finals, and produced the online award ceremony. Tournament registration took place in January, and games ran over a two-week span in February. 

Predictably, students competing in the first global tournament ran into issues involving connectivity and timely trades. However, while most of the students who beat the market had some problems with their web connections, they were able to craft winning strategies. Unintentionally, playing the game taught an important lesson about the real stock market: smooth functioning of technical infrastructure is essential for global trading.

The game Ibbotson invented is a hallowed rite of passage for Yale School of Management full-time MBA and MBA for Executives students. For many years, it was played with cards at an event at the New Haven Lawn Club. In 2018, generous grants from Citibank, the Yale School of Management’s International Center for Finance, and Ibbotson enabled the game to be opened to players from outside the Yale campus. The Case Research and Development Team and the Custom Application Development team at Yale’s central IT department collaborated to create a version that could be played internationally.  

Players put the principles of trading to work in the game. Each receives five shares in the four companies on the market and some cash. In half an hour of trading, the game reproduces a year’s worth of trading experience in real time. Players buy information on the value of the companies, called “peeks,” to help decide whether to buy or sell, short, or hold a stock.  There is also public information on the companies available in analyst reports. No player sees all the available information on a company’s value, but each sees enough to set a strategy for finding the companies with the highest underlying values. 

The Yale Stock Trading Game is unique among online trading games in that it  sharpens trading skills in a zero-sum way; the players themselves constitute the market. For every profitable trade one player makes, another is making an unprofitable one. However, players only find out the real value of their trades when the underlying, liquidation values of the stocks are revealed at the end of the game. Generally, only about half of the players discover that they have beaten the market return (defined by a portfolio that had not engaged in any trading in the game).

In this week’s game, one key to Cho’s win was  quickly realizing that one company among the four was actually valueless. She shorted that stock and went long on two other companies that turned out to have high liquidation values. 

Ibbotson’s hot tip: buy as much information as possible on a company, since the game tests how information tips markets. 

The fun and fast game allows players to see how the theory of the efficient market plays out in real time. Is the theory borne out by the game? Not always, Ibbotson says. Distortions creep in. In the final game of the global tournament, three of the four stocks’ final market price were close to their actual values. However, players valued the company that actually was bankrupt much higher than the $0 its shares were worth. The students who did well took advantage of the distortion to engineer their market-beating portfolios.

The Stock Trading Game is distributed by Yale SOM’s Case Research and Development Team. More information about the game is available at  stg.som.yale.edu. The minimum recommended number of players is 20.