Stock Broker Trading
A System Dynamics Based Interactive Learning Environment (SDBILE)
1. Andria
MPhil Student in System Dynamics, University of Bergen, Norway - domingoa@ifi.uib.no
Doctoral Program Student, University of Palermo, Italy - andria@unipa.it - ricopa@unipa.it
J. Di Mase
Professional man - Ex-President of the Venezuela National Bank - kirk@star.flashnet.it
A. Lino
MPhil Student in System Dynamics, University of Bergen, Norway - Allesan!@ifi.uib.no
Doctoral Program Student, University of Naples, Italy - ricopa@unipa.it
Abstract: "Stock Broker Trading’ is an Interactive Learning Environment (ILE) that reflects the basic dynamic of the stock market. Its
main goal is to introduce participants to their first experience as portfolio managers in a dynamic and safe environment. Participants can feel
how their own individual decision interacts with other exogenous factors in variable situations that affect their portfolio net worth in an
unpredictable way. The users of this ILE will understand the behavior of the share price due to market forces; moreover, they will experience
a first approach of decision process to balance capital performance and risk managing. This ILE is set on a network that allows each user to
observe how his actions, or lack of them, in conjunction with those of the other users produce a fluctuation on the share prices. Since each
participant has a personal appreciation of the facts as well as expectation for the future, and - in time - different financial position, he will
make different decisions for his own strategy in reference to risk, safety or good performance. This interaction of decisions will feedback the
system creating a dynamic behavior of its own. The learning experience is supported by the debriefing process, where it will be possible to
analyze each decision and its consequences through the behavior of the system.
Introduction
Over these last years, the financial sector has grown aware of the dynamic complexity of their own organization and
their operating environment as well. Today, it is necessary to provide sophisticated tools for financial investors
offering them the possibility to experimentally design and test policies. In this way, investors can form alternative
investment strategies before they actually take action. The complexity of the financial sector depends on the
underlying system structure which is characterized by delays, side effects, feedbacks, non-linearity, and vagueness.
The generation of many problematic behaviors such as the unstable pattern of stock market price, arises from
structure of its system. Most importantly, there is a strong relationship among structure, behavior, and external factors
(i.e. investors’ decisions ) that can influence and shift the relative dominance of the structural components over time.
By making decisions that alter the real system (Fig.1), investors receive information feedback about the real system,
and using the new information, they revise their understanding of the system ( Sterman 1994 ). Unfortunately, there
RealiWorld’ are some barriers to individual and
organizational learning that are associated
with the temporal and spatial boundaries of
Mo Information our mental models. To overcome such
Decisions Feedback impediments, Sterman ( ibid. ) lists the
benefits of simulation-based interactive
learning environments in the form of
“microworlds".
Fig. 1 - Learning is a feedback process
"Stock Broker Trading" is an Interactive Learning Environment (ILE) that reflects the basic dynamics of the stock
market. Its main goal is to introduce participants to their first experience as portfolio managers in a dynamic and safe
environment. The users of this ILE will understand the behavior of the share price due to market forces; moreover,
they will experience a decision process to balance capital performance and risk managing. This ILE is setona
network that allows each user to observe how his actions, or lack of them, in conjunction with those of the other
users produce a fluctuation on the share prices. The learning experience is supported by both the debriefing
process, where it will be possible to analyze each decision and its consequences and the ILE instructional design
itself, which uses external stimuli to initiate, assist, and support the internal processes of learning (Gagné 1985 ).
The Stock Broker Trading
The design:
The SDBILE is a multi/single user network simulation game realized using Powersim® 2.5 software. Up to 4 players
may participate in the simulation at the same time. In addition, a simulated player and a facilitator have been
connected to the game. All players (investors) are competitors acting in the same system (market) where they give
the same kind of input and receive the same kind of output (symmetric game). For this reason, the same user
interface has been used for all players. In the simulation, the users of the game cyclically enter a planning phase,
followed by an operational phase. When all users have made their decisions at a given point in time, the simulators
automatically start running until the time for the next decision (operational mode). The player and facilitator
interfaces (main models) are different and they share the same simulation model (co-model).
Player, facilitator and simulated player roles:
Player's role: He is a trainee financial manager selected for evaluation for promotion. An investment in a company is
assigned to him with the instruction to trade shares for the best performance yield in one year period (time horizon).
His Boss, the CFO, has selected from the corporate financial investment portfolio, a corporation which has some
expected dividends, and has given him the responsibility of the administration of certain number of shares. He
makes decisions on this investment once a week (time period). Every decision to buy or sell shares will cost a
certain percentage of the operation as broker commission. Knowing that he will need some capital in order to trade
with these shares, his boss assigns him some cash and, in addition, he can borrow money from the bank by paying
interest. The bank will loan him money taking the shares that he owns as collateral at their current market price. The
cash that he has deposited in the bank, will guarantee some monthly positive interest. After one year the CFO will
examine his performance comparing it against the alternative investment.
Facilitator's role : The facilitator installs the game and may specify additional initializations (which will involve
different scenarios). During the game, the Facilitator will act as an observer figuring out all important information for
each player along all time horizon. He can also observe decisions taken by each player step by step. At the end of
the game, he conducts the debriefing process, where it will be possible to analyze each decision and its
consequences.
Simulated Player : It has been modeled so that a decision making process leads the computer to act as a decision
maker in the game. Simulated decisions also allow us to test the game by simulating one player against the
computer.
Instructional Design
One of the most important guides in building this SDBILE has been the strong relationship between the external
instructional events and the learning process. " In speaking of the event called learning, one often uses the phrase "
the learning process ". Actually, according to modern research and theory, learning involves a whole set of internal
processes, not just a single one. These processes are themselves unconscious and automatic. But they can be
aided by some added external stimulation. These external stimuli serve to initiate, assist, and support the internal
processes of learning. In whatever form, these external stimuli, systematically arranged, constitute what is called
instruction" (Gagné ibid.). The following paragraphs contain brief descriptions about some of the relationship
between the Gagné's processes of learning and their associated events of instruction within this SDBILE.
[Semantic encoding - Providing learning guidance] : Semantic encoding means putting incoming material in a form
with such syntax that is thus made meaningful. In this SDBILE, this instruction has been defined showing causal
loop diagrams, stock and flow diagrams, sub-system diagram and their associated explanation through the use of
multimedia objects (sounds).
[Long term storage - Elaborate amount to be learned] : To add strength to what is stored in memory, DDE (Dynamic
Data Exchange) links between Powersim® and Excel applications have been used to collect, elaborate, and
analyze data generated by simulation. Moreover, a familiar interface for the players has been built in Excel by using
Macro Language. Navigation buttons in both environments ( Excel and Powersim® ) allow to go back and forth for
having different kind of information.
[Gratifying - Providing feedback about performance correctness] :" What you measure is what you get" ; In this
SDBILE, a performance indicator has been introduced to support the facilitator's role for giving positive or negative
feedback according to user's performance.
Future enhancements
« To consider more than one corporation to allow investment portfolio analysis and selection.
« To improve briefing and debriefing processes based on the main purpose of the SDBILE.
+ To introduce designed context sensitive feedback messages.
References
Davidsen P.I. (1993) System Dynamics as a Platform for Educational Software Production. Barta et al. 1993, eds.
27-40.
Davidsen P.I. Implementing Elements of a System Dynamics Approach to Organizational Learning.
Forrester, Jay W. (1961). Industrial Dynamics. Productivity Press. Cambridge, MA.
Gagné R.M. (1995). Learning Processes and Instruction. Training Research Journal, Vol.1, pages 17-28.
Senge P.M. (1990). The Fifth Discipline. Doubleday Currency, N.Y.
Sterman J.D. (1994). Learning in and about complex systems. System Dynamics Review Vol. 10.
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