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 yesterday’s closing price of €50.15, the total value of your position is about €100,000.

The duration of the simulation is initially set to 10 minutes which corresponds to a 24-hour trading day.

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

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 is an American firm in the pet food manufacturing industry. CatFood operates more than 100 chains of cat food stores in main cities in the United States. It also operates one of the most visited shopping websites in the world for pet food and treats. It offers organic food with 100% fresh and natural ingredients with recipes that owners might use at home.

The headquarters of CatFood are in Miami, which is well-known to be the best city to live in with cats.

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: CAT) has increased from its introductory price of €10 to a recently new high of €55. This positive trend in the stock price has also been accompanied with market volatility.

CAT shares are quoted in European and US exchanges. CatFood is one of the top firms in the Pet Food manufacturing industry.

CAT shares are currently priced at approximately €50.

Today is an important day for CatFood, as the firm will hold its annual General Meeting. The CEO of CatFood will announce the profit for the last year. The expectation from the market consensus is an annual profit of €80 million for CatFood. How much profit is CatFood going to announce?

During the General Meeting, CatFood may also announce the launch of a new line of organic food. For a firm, the ability of catching up with the market trend is widely seen as a recognition of its sustainable performance. Such a move has been expected by market participants.

Investors are also aware that today at 10 AM the US government releases the statistics about the Gross Domestic Product (GDP) for the last quarter. The GDP has longtime been considered a reliable leading indicator of future economic activity. Thus, a decrease in the GDP would forecast slow economic growth, while an increase in the GDP would forecast fast economic growth. The market consensus about the GDP is its stability (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 GDP figure for today?

There is speculation about takeovers in the Pet Food manufacturing industry.

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.

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.

Yuanpei_Ding
ESSEC Business School

Professor François Longin
ESSEC Business School