Global Stock Market

[colonel_truman]

Which post do you mean? Happy to work with you guys!

Your original post states the desired outcomes of the implementation but it will be important to provide an algorithm about how programmers could actually implement it. The aforementioned post is a good example, which outlines an algorithm that could be easily understood and implemented.

ie. the algorithm suggested by that post:

the total revenue growth for 50 combined companies are correlated to 50 virtual companies, as well as their profitability, P/E, P/B ratios ...etc.

I believe there are two possibilities:

Easy:
The price moves (sideways, up or down) for a period of time. After that period a new cycle starts (again sideways, up or down). Totally random, both trend and cycle.

1- The GSM is there just to park our corporate surplus money.
2- Easier to implement, and will not drag our attention to it excessively.

Hard:
Each international corp. price will change as is usual in the game.

1- They have an income statement and balance sheet, with several year data history, to account for the price trend.
2- The creation of these has to come out of nowhere. I guess not impossible but it could require quite some ingenuity.
3- Heavier cpu processing requirements?

I´d go with the easy one.

[David]

I was reading on Flipboard on the other day and came across this article: https://www.forbes.com/sites/greatspecu ... 47266d3149

It provides a perspective on the returns of different asset classes in the past decades.

I noticed that the "Non-US Stocks" asset class performed poorly in the past 3 decades and it never had a rebound after a decade of poor performance as one might expect. I didn't get an impression that non-US Stocks performed so poorly until I read this article. It doesn't seem real to me for such poor performance numbers - perhaps the way the article categorized stocks into the "non-US Stocks" has something to do with the low numbers?

On the other hand, if the numbers are real, it may suggest that the stock market is completely unpredictably as the performance of the non-US stocks does not conform to any of the patterns suggested in this thread.

In addition, cycles seem random in lengths in the real world as well. Even cycles do not seem to be an essential characteristics of every stock market. Some stock markets like the mainland China stock markets seem absent of any recognizable cycles in the past decade.

Any thoughts?

[colonel_truman]

Any thoughts?

Yes.

First, I´m pretty sure the figures given are relative:
If we take gold for example: it might have fared better or worse if we´d consider the price in british pounds or euros instead of US dollars. The value of the currency is very important. Maybe that "lack of a rebound" was because of the relative strenght of the dollar. And non-US stocks looks too broad a definition anyway.
The performance of the stock market in countries with very high inflation could seem extraordinary when it´s not... because of the currency losing strenght.

Second, I said once in another post that stock price appreciation depends on the willingness of the bidders, not on cash flows or any other metric, as the stock market is a "public" auction. The in-game movements are just a convenience (and I´m fine with that, altough it could be changed in the future to reflect a true auction).

As for cycles, I said "totally random" because I assume you must use a convenient approach for the game.
You could make 6 month, or 10 month, or 10 year cycles, let´s say 20 different cycle lenghts, and then you have 3 different behaviors (up, down, sideways). Stir and serve
On the other hand that doesn´t mean cycles are random in reality. Just it might be too much to get too deep into that for caplab, imho.

[David]

Guys

For starters, thank you for all the hard work on the global stock market - I think the layout is pretty perfect and absent a few minor tweaks, this should be a viable game mode.

Immediate Reaction on gameplay:
Very hard to decide when to invest and what to invest in given the lack of information
Dividend yield goes from 3-5 % in the initial phases of the game to <1% in later stages of the game
Generally, stocks trend lower overtime (more than half the stocks in the market over a 20+ timeframe have lost value in my game)

Proposal:
Stocks be grouped into two categories - Growth stocks and value stocks
Growth stocks - price more volatile, with volatility in-line with nation economic growth cycle
Each upward movement from lowest point to highest point should be 50-100%
In short, P/E ratio should swing from lowest of 15 to highest of 30 times
should have dividend yield between 1 - 3% with dividends increasing between 5-10% every year
Each stock market boom-bust cycle should be around 5 years
Price action wise (over a 20 year horizon), the price chart should look like 1) Steep, increasing slope; 2) M-shape with the end point of 5 years 20-30% higher than beginning of the year

Value stocks - price stable; limited volatility (-10 - +15% swing in P/E ratio over 5 years)
In short, PE ratio should go from 9 to 11.5 times
Dividend yield is around 5-6% with yearly increase off 1-3% every year


Growth stocks - TMT, Capital Goods, Energy, Banking, Consumer Goods, Retail

Value stocks - Insurance, Utilities

Hi Jason, thanks for your inputs. I've got some initial feedback from the dev team, as follows.

1) The following is the list of companies in the global stock market. Which of them are growth stocks? Which of them are Value stocks? Could you write "growth" or "value" next to their names in the list?

2) Is a stock either a 100% growth stock or a 100% value stock?

3) Can a stock be a mix of both? Like 70% growth and 30% value in a single stock? Is there such a thing?

4) Would there be any stock that is neither a growth stock nor value stock?

5) Will a stock make the transition from a growth stock to a value stock and vice versa in the game? If so, what will trigger the transition? Will the transition happen slowly or instantly? What kind of algorithm can be used for implementing this?

American Express
Apple
Boeing
Caterpillar
Cisco Systems
Chevron
DowDuPont
Exxon Mobil
General Electric
Goldman Sachs
Home Depot
IBM
Intel
Johnson & Johnson
Coca-Cola
JP Morgan Chase
McDonald's
3M Company
Merck & Company
Microsoft
Nike
Pfizer
Procter & Gamble
Travelers
UnitedHealth Group
United Technologies
Verizon
Visa
Wal-Mart
Walt Disney

[beamthegreat]

I don't think you should label each stock as a "growth" or "value" stock as almost all of them have historically been both during different time periods. I think the current stock valuation system does a fair enough job of valuing companies so all you need to do is construct a virtual company that represents that stock. In my opinion, I also think that the average revenue growth, profit margin, for each company should be randomized at the start of the game.

[buells]

Value stocks are typically defined by low P/B (or high book to market, which is B/P) in factor models used to model stock price returns. Historically, deep value has outperformed growth. In recent years, that hasn’t been the case. In the game, low P/B and low P/E stocks could do better during recessions while high valuation (“quality”) stocks could do better during boom times. The point is it shouldn’t be predictable such that you should always follow a certain strategy because that is too boring. Small cap also tends to outperform large caps, but all of the GSM stocks are large caps anyway.

[David]

The dev team has been working on improving the global stock market. In the upcoming version 6.3.00, you could expect the return on investment in global stocks to be more reasonable.