Stock Market

[lullus]

I'd like to find some experienced RT3 stock market sharks who can help me.  Do anybody have any experience about the trends (or laws) of price's changes? Are reliable the P/E, P/S or P/BV markers for the future prices?

[Gwizz]

The stock market is mostly controlled by the money earned when a train reaches a station.

If no train arrives for a while then stock price can drop.

The economic status of the game also affects the stock market, but not as much.

[lullus]

Thanks for the notice. Yes, I saw that the prices (and the other markers) change if a train arrives a station (and brings some income). You wrote the global economic status modifies the prices, too. Good. But my question was about the possibilities of the prediction of the future price's value, because I want to make speculations. Therefore important is the reliability the different markers. And, did anyone see, that the prices changed, if the newspaper had reveal an event, f.e. a war? Are there other (maybe random) factors, too? Is there the game a good modell for a real situation or do the prices depend only on the economical markers of the companies?

[Gwizz]

There is a lot of complexity programed into the game engine, it wouldn't suprise me to have many factors affect the stock market.  If you are able to discover some of these factors let us know.

[JSS]

lulus, from what I have seen there is very little specific information available as to how some of the information you are seeking is arrived at. Not since RT1 have I seen

[Lama]

I did some research on the relation btw dividend payment and stock price, which I posted here:

http://www.railroadtycoon.info/forum/viewtopic.php?t=136

It might be interesting to try the same type of experiment to isolate the influence of trading, economic status, and cash flow.

[JSS]

Lama, the results of your research were most certainly very interesting.

In regard to the adjustment to the stock price at the end of the year, do you thing the new price has something to do with the averaging of the price using the performance over the last few years?

Since in the stock price calculation the BV is the major factor, a clearer account of what is included in that amount most certainly would be very helpful. As an example, how is the asset of a section of track calculated? Is it just a basic amount? Is the amount modified by the current economic state? Is the amount discounted by other modifiers, like events?

All this info could most likely be arrived at by painstakingly analyzing (as you have) the operation of test setups but why not make that information available in the manual in the first place?

[Lama]

Well, JSS, as you said earlier, the actual formulae used are probably so fuzzy that it would have been almost useless to include them in the manual. My guess would be that the fuzzyness would serve the purpose of preventing that a player can exactly predict what the stock price will be. After all, there is always a moment of speculation (in the double meaning) involved in stock deals.

The price reduction at the end of the year baffled me, and I could not come up with a better explanation than that it "just happens," which is of course not an explanation. It makes a lot of sense that it would average out past performance.

I took my original data, month-by-month, and indeed, the average bv/s over the past twelve months comes close to the price at the beginning of the new year.

Of course, all else remaining constant, the price is still higher, the higher the dividend, even though a higher dividend means a lower book value, hence a lower bv/s.

The difference between the price derived at as the average of bv/s in the past x months, and the actual price, would be a function of the dividend paid (and of a bunch of other factors, to be sure - the point of my test was mostly to prove that dividend drives up the price, which some people had doubted).

I hope people will start running more tests on all these things you brought up. I might do some more when I get around to it. Its busy here, the semester has just begun.

[JSS]

Lama, the formula used to calculate the Average Stock Price used to be:

AP=((PAP*7)/8)+NCS

PAP meaning the Previous Average Stock Price and NCS meaning the Newly Calculated Stock price.

The added reward of a higher stock price with the paying of dividends was not surprising to me since it was mentioned already in the RT2 manual and did expect it to remain so in RT3. Am glad however that you did confirm that with your test.

Still would like to see those formulas made available. If for nothing else but to just find out what factors are involved/included in the calculations.

Talking about predicting stock prices - what I have never understood however is why one has access to the financial information of other companies without even owning a single share. One would expect that information to be hidden or at least hidden to the end of the fiscal year when the shareholders are being informed about the financial performance. As it is you can see as an example what the YTD income is which can be used as indicator for investing.

[lullus]

Thanks for all information. It was very useful to read them. I'm working a real analysis about the causes of the price's falling nowthere. The new informations help a lot. My aim is to find the factors which help to predict a declination in order to make short sells. However, I'm making this not in an experimental situation (like Lama), but in a real one (and in a long-time period). It's busy here, too, but I'll post the results maybe next week. If there is anyone who has experience about short sells, please inform me. Maybe, it would be good to begin a new topic, too. Good wishes.

[JSS]

lulus, perhaps I do not really understand the stock market workings that well but what you are trying to do must be next to impossible in this game unless you are doing your stock activities in spurts and with the game on pause. Furthermore, any strategy that is based on general short selling based on a company financial performance in this game has such a high probability of chance that its use is questionable IMHO. My experiences have been mostly with RT2 however.

The main influential factors, especially early in the game, are train income and change in economy.

Even though one can say that there is a better than 50% chance that the economy will continue to move in the direction it has been moving (up/down to either limit) at what interval that actually will happen (besides the designated months) is by chance. Train income is also not predictable but there is a very strong likelihood that the stock will increase wit the arrival of a train. This would mean that you need to watch the A.I. companies like a hawk and given that they usually have very short lines when they start out there is not much of a window of opportunity to make short selling an effective tool to increase your finances in the early part of the game. Once one adds to that the cost of the transactions there is very little to be had if anything IMHO. Now you might find specific cases on specific maps where it might be made to work either because of a particularly bad starting location or you have created a situation where you are sabotaging the other company operation. However, generally speaking I found that short selling early in the game can ruin ones game and more gain is to be had by buying shares.

Even later in the game the practice of general short selling is questionable except in special circumstances. Other A. I. players will jump on you if you take the short selling to worthwhile levels and I am not one of the players that want to wait years for a meager payback.

There is however a special circumstance where short selling is very beneficial to ones PNW. This has little to do with a company

[Gwizz]

The only time I make use of short selling is when an AI shorts my RR.  Then, I buy some of my own stock to drive up my stock price, if my down turn in stock price is only temperary.  This causes the AI to lose money.  ;D

I've never been very successful in short selling AI Stock.  The AI companies seem to have an advantage that delays their demise for awhile making the method too unpredictable.

It would be interesting to see how the game math on short selling and the AI company, works.

[belbincolne]

I've had a couple of tries at short selling and - like GWizz - never made much money out of it. In theory it should work fine but in fact it doesn't seem to.

[MiG]

O only use short selling stock when another railroad company is really doomed. This is usually the case is one is using loans to finance losses. This is really just free money: you buy some shares a month and wait for them to crash at the end of the month.