How Do People Play The Trading Game?

“That’s cool,” a coworker said when I showed him the game. “What’s the point?”

“I’m not sure. We might not know until people play it.”

And we might not still! Digg called it “A simple game that will help you understand the stock market,” and it does implicitly purport to do something like that, but it is contrived and nonrepresentative of an actual stock market in a thousand ways. It assumes zero transaction costs, no leverage, and perfect liquidity (so no trade of any size is significant enough to move the price of the stock). It offers no real risk to compel loss aversion and lays only a thin veil across history to shield it from distortionary hindsight prescience.

Every player starts with $500, which is fully invested in the given stock with every tap. If we look at a sample of 13,000 people, playing 30-second levels, they ended up with $6.7 trillion (including winnings from their previous play-throughs). If we instead look at 130,000 random people in the database, their final cash sum is $1.3 × 10¹²⁷, or $10 with 127 zeros. That’s roughly the number of atoms in the universe, multiplied by the diameter of the universe in miles, multiplied by the number of milliseconds since the Big Bang. Numbers get big fast when reinvested and compounded unconstrained by earthly friction and liquidity!

So people did way too well. The average stock in the game had returns of 46 percent, which already demonstrates selection bias in my choosing “interesting” levels. But the average player return was 153 percent. It is possible in real life for the average player to beat the average stock, but the figures from the game are skewed because they only count the human players and not the imaginary counterparties to their trades. Finance is not necessarily zero-sum, but the game doesn’t even have anyone taking the other side of player trades, so everybody can buy and everybody can win—cash from nowhere.

Still! It is an illuminating behavioral laboratory, both in comparison to stock markets and in contrast. Based on 10,000 play-throughs of each level (with a total of a million pairs of trades), a lot of looking over people’s shoulders, and some discussions, here is how people played and performed.

Read more:link