Teaching Big History by Simon Richard B

Author:Simon, Richard B.
Language: eng
Format: epub, pdf
ISBN: 9780520283541
Publisher: University of California Press

ACTIVITIES AND EXERCISES FOR TEACHING THRESHOLD 8

TRADING ON THE STOCK MARKET

* * *

Martin Anderson

Threshold Related to the Activity: Threshold 8

Category of Activity: Learning activity

Objective: To give students a basic understanding of how the stock market works

Overview of Activity: Students will engage in three rounds of buying stock and assessing their performance. This activity will take an entire class period, about one hour and fifteen minutes.

Faculty Preparation for Activity: Bring a briefcase or something to pull slips of paper out of.

Cost: n/a

Student Preparation for Activity: A week before the activity, students divide into groups of four. Each group will represent a corporation, which they will name along with the product they make. Students design and create twenty stock certificates (shares) for their company. Students should be encouraged to be as creative as possible in making their certificates. Students make eight slips of paper, one saying “25 percent loss,” one saying “10 percent loss,” one saying “0 percent profit,” one saying “$5 dividend,” one saying “10 percent profit,” one saying “25 percent profit,” one saying “50 percent profit,” and one saying “100 percent profit.” Students must bring these to class on the day of the activity.

In-Class Sequence of Activity:

1.On the day of the activity, students divide into their groups. Each group will be given $500 with which to buy stock. This will simply be represented by writing $500 on the board next to the name of the group.

2.Each group then has five minutes to convince their fellow students to buy their stock, at either $25, $50, or $100 per share. Purchases are recorded on the board.

3.The instructor then places the slips of paper into the briefcase, mixes them up, and randomly draws one slip out per company and records the result—for example, “Company A had a 25 percent profit.” The results are now recorded—for example, “Group 1 purchased 2 shares of Company A at $50.00 each, which now have a value of $62.50 each.”

4.It is expected that students will groan when they lose money and cheer when they gain. Personalities will emerge, with students dividing into those reluctant to lose money despite the possibility of gain and those willing to risk money despite the possibility of loss. Ask them why some are more risk-averse than others.

5.Repeat the process of buying and selling stock three times.

6.Some students will recognize that some means of evaluating how good a company is should be provided. Explain that this is done by stock market analysts or by themselves in selecting stocks or mutual funds for a personal or retirement account.

7.After the exercise is over, explain that a method of analysis was available: of the eight slips of paper, only two were losses (25 percent), two (25 percent) were neutral, and four (50 percent) were gains; therefore, there was a 75 percent chance of no harm and a 50 percent chance of gain. Given this, everyone should have always risked all their money, even though it is likely that many did not buy stock for fear of losing money.

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