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SIMULATIONS

CatFood

CatFood

Anticipate today the business of tomorrow

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CatFood simulation   SC_CFD3A_US_V1

Simulation scenario

The CatFood simulation allows you to experience a day of trading in financial markets.

During the simulation, you will receive news about CatFood, a company whose shares are traded on the SimTrade platform. You will be able to buy and sell shares of CatFood.

Your goal is to maximize your trading gain at the end of the simulation.

At the start of the simulation, you own an account consisting of 50,000 in cash and 1,000 CatFood shares. Given yesterdays closing price of 50.15, the total value of your position is more than 100,000.

The duration of the simulation is initially set to 10 minutes which corresponds to a 24-hour trading day. Using the timeline, you can increase or decrease the simulation speed at any time.

You must complete the simulation for it to be valid for your grade.

Grading

Your grade for this simulation (100 points) takes into account the following elements:

  • Your trading performance (50 points): your relative performance, that is, the difference between your gain/loss on your position with your intervention during the simulation and the gain/loss without your intervention (as though you have not sent any order). A relative performance between 0 € and 5 000 € is expected. ☛ Computation of the points of performance

  • Your trading activity (20 points): the launch of the simulation (5 points), your determination to go to the end of the simulation (5 points) and the sending of at least one order to the market (10 points).

  • Your participation in the survey at the end of the simulation (30 points): the answers to this survey will be used for a research project on behavioral finance.

CatFood

CatFood is a large firm in the Food and Beverages (F&B) sector. CatFood operates several chains of bio fast-food restaurants in main cities in Europe, Canada and Latin America. Each of these chains cater to all ages, from teenagers to senior people. CatFood was initially a small family firm, founded in Normandy in the early 1950s. The corporate headquarters of CatFood are in the Parisian region.

Evolution of the stock price

After several decades of rapid growth, CatFood had a successful initial public offering (IPO) in 2005.Since its introduction in the stock market, the stock price of CatFood (code: CFD) has steadily increased from its introductory price of 35. NFD shares are quoted both in Paris and New York stock exchanges. CatFood is one of the top firms in the Food and Beverages (F&B) industry in Europe.

NFD shares are currently priced at approximately 50.

What will happen today...

Today is an important day for CatFood, as the firm will hold its annual General Meeting. At midday, the CEO of CatFood will announce the profit for the last year. The expectationfrom the market consensus is an annual profit of 320 million for CatFood. How much profitis CatFood going to announce?

Besides, public opinion remains shocked by the tsunami that ravaged the French Atlantic coast during the last week. The most important damage happened to the Mont Saint-Michel, which is an icon of the French culture. Unless an urgent reconstruction effort comes, most buildings of the Mont Saint-Michel may collapse. Consequently, the French State has set up a Super Fund to finance the massive cost of reconstruction of the Mont Saint-Michel. Many companies, both in France and abroad, have already volunteered to contribute to this fund.

There is speculation that at the beginning of the day, the CEO may announce a corporate donation to the Super Fund. This rumor is plausible, as some of CatFood competitors have already announced their willingness to donate to the reconstruction fund. However, companies vary in their level of commitment. Less generous companies are giving out relatively small amounts of money (less than 1% of their profit), while more generous companies are giving out large amounts of money (up to 30%of their profit). Which path will CatFood take?

Investors are also aware that today at 5 PM the government releases the Household Confidence Indicator (HCI) for the last quarter. The HCI has longtime been considered a reliable leading indicator of future economic activity. Thus, a decrease in the HCI would forecast slow economic growth, while an increase in the HCI would forecast fast economic growth. The market consensus about the HCI is its stability (i.e. 0-point change). However, some financial analysts debate about two possible scenarios: a 2-point increase or a 2-point decrease. Which will be the HCI figure for today?

Finally, the new composition of the 100 Global Sustainability Index will be announced by the end of the day. For a firm, to be part of this index is widely seen as a recognition of its sustainable performance. Which will be the new composition of this Index?"

What you will learn...

Teaching objectives: the CatFood simulation will enable you to become familiar with the key concept of market efficiency and how the news flow impacts the evolution of financial assets market prices. You will also discover key determinants of success for a company in the Food and Beverages sector.

Learning goals: the CatFood simulation will also allow you to acquire the following skills:

  • Passing orders on the market

  • Analyzing relevant information about the firm's business (news flow)

Before or after launching this simulation, you can obtain additional information on the financial markets by taking courses related to the simulation.

Research in behavioral finance

The data regarding your trading activity and your answers to the survey in the CatFood simulation will be used as part of a research project on behavioral finance carried out by Prof. Longin and Yuanpei Ding from ESSEC Business School.

The data will be used anonymously.

About the authors of the simulation

Yuanpei_Ding
ESSEC Business School


“Eye tracking is a technology that tracks where your eyes are looking at in front of the screen. It helps to better understand the decision-making process of individual investors.”

 

Professor Franois Longin
ESSEC Business School


“Before launching the CatFood simulation, remember that the market is always right and that the market is always right, even when it is wrong.”