In theory, part of the reason the system should be effective is that those who predict most accurately get rewarded with DKP, and in turn have more influence on future predictions.
So the stocks should be adjusted to reality, so that anyone who knew the Red Steel price was ridiculously low 3 weeks ago gets their just reward.
Here's the problem: There should be no lag time between Ubi's announcement that Red Steel has sold 950K units and when the price of the stock becomes 96 DKP. But there is, meaning people can see the press release, buy the stock at 47 and then sell it at 96 three minutes later. In effect, these people are trading with non-public information. Effectively, the information that Red Steel sold 950K copies has not become public until an admin manually changes the stock price. Its almost exactly like the advantage one gets from having insider information, which it is illegal to trade with, of course. Except that the unfair advantage merely falls to those that were reading the right blog at the right moment and are fast on the trigger.
Not manually changing the price does not eliminate this unfair advantage, but actually lets more people in on it. Some people would buy at 47, others at 61, others at 75, and all make a bundle over the half hour or however long it might take to trade the stock all the way up. When in fact their window should have closed within seconds of when that Ubisoft press release came out.
Its a problem. I have no idea what the solution might be. But I don't think its something that seriously ruins the game.
Oh, and I guess one other thing I'd be wondering is what do we do once total sales are announced? Let's say there's an IPO predicted at 500k sales, and it's announced that it actually sold through, not in, 900k. So in theory, if we're operating on reality, that IPO could never go below 90 DKP if we're adjusting the market to fit reality. Is that correct?
Do we get this kind of information for every single game? Wouldn't we be adjusting all of the DKP pricing on our stocks at some point?
"The point of the stocks are to forecast the number of copies games will sell in REALITY."
Yes, we're trying to forecast and predict reality. We are not reality. I can see the point in the last comment about 'rational trading' though.
If everyone here was a massive.. Mega Man.. fan for example, a Mega Man IPO would be predicted much higher than normal. But really, that's a problem we're going to have regardless. We aren't a proper cross section of society. Chances are, if you're on here, you're more in to video games than the average person. That already biases the market.
I can see both sides of the story here, but we're meant to be a tool for possible prediction. When we're wrong, we're wrong, I don't think we should be necessarily issuing massive corrections when this happens. We're meant to see how close we can get to reality, and sometimes we inevitably should fail.
Check out a book called "The Wisdom of Crowds". It deals with a lot of these kinds of things, and really explains why stock markets are so hard to predict.
@jayen, I decided to write a complete blog article to answer your question. I don't know of any particular online resources where you can learn more about this. There are some text books that discuss stock market structure, but they are not the most entertaining reads. As suggested by the blog post, the easiest way to see this is understanding how double call auctions work (like how the NASDAQ trades) and seeing how the orders go in and out of an order book.
@dakkonfire, the blog post is relevant to your question as well.
Dakkonfire, what you say is a valid concern for a lot of stock market noobies.
I know when the simExchange got started months ago, lots of players thought the stocks just depended on hype and what people on the simExchange thought stocks were worth--and not any relationship with sales in the real world.
Time and time again, the trading has shown that there is a response to news in the real world and that the stocks do not just trade randomly. Yesterday's buying spurt again indicates this as traders bought over 100,000 shares of Red Steel before the market makers moved their bids up. In the real stock market, market makers would've seen the news cross Bloomberg and moved their bids up beyond 95 DKP immediately.
"The Sim Exchange has nothing to do with reality."
I think you are missing the point of the simExchange. The point of the stocks are to forecast the number of copies games will sell in REALITY.
If news comes out that indicates a game will sell more or less copies than the current prediction, the price then moves to price in that information (that is how stock markets work and that is why stock markets are the best aggregators of information).
If the market makers don't adjust their bids, then it would be free money on the table for anyone trading the other side. If the market makers were real people, they obviously don't want to lose that moneym and would immediately adjust their bids to the current information.
So how exactly did this stock go up 100% in a blink of an eye?
If we're adjusting based on real market values, that's just plain dumb. The Sim Exchange has nothing to do with reality. It has everything to do with what we think is going to do well. If we're wrong, we're wrong. But e don't adjust based on what's happening in the real world.
@zukaus, this will likely be quite discretionary when a human being adjusts the market maker. However, unlike the real financial markets where market makers are watching the relevant news all the time, there will be times when market maker's prices aren't adjusted as they should.
One of the impetus for this change was the March 2007 futures. When information implied dramatically different prices, the market makers should have adjusted the prices, even on uncertain information. This will likely be an evolving process.
@KultofCows Ok, I understand that makes sense, but what reports will move the markets in the future? Will this only happen with sales numbers released by the publishers themselves?
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In theory, part of the reason the system should be effective is that those who predict most accurately get rewarded with DKP, and in turn have more influence on future predictions.
So the stocks should be adjusted to reality, so that anyone who knew the Red Steel price was ridiculously low 3 weeks ago gets their just reward.
Here's the problem: There should be no lag time between Ubi's announcement that Red Steel has sold 950K units and when the price of the stock becomes 96 DKP. But there is, meaning people can see the press release, buy the stock at 47 and then sell it at 96 three minutes later. In effect, these people are trading with non-public information. Effectively, the information that Red Steel sold 950K copies has not become public until an admin manually changes the stock price. Its almost exactly like the advantage one gets from having insider information, which it is illegal to trade with, of course. Except that the unfair advantage merely falls to those that were reading the right blog at the right moment and are fast on the trigger.
Not manually changing the price does not eliminate this unfair advantage, but actually lets more people in on it. Some people would buy at 47, others at 61, others at 75, and all make a bundle over the half hour or however long it might take to trade the stock all the way up. When in fact their window should have closed within seconds of when that Ubisoft press release came out.
Its a problem. I have no idea what the solution might be. But I don't think its something that seriously ruins the game.