Trading Theory for Practice

My name is Gavin Brown. I’m a Senior Lecturer
in the Accounting, Finance and Economics department. I specialize in corporate finance, teaching
at level 6, third year undergraduate as well as postgraduate.
When I joined the university two to three years ago now, my focus really was bringing
a more applied approach financial economics. So, obviously, there is a lot of conceptual
theory, and formulae, and mathematics around that, but I really wanted to try and demonstrate
to the students that in the real world it doesn’t really stand up in the same way. So,
what I have done is I use a platform called Bull Bearings, which is a free online platform
available to students and also casual or leisure investors, as well. And, what it does is it
allows students to trade with a fictitious amount of money, so not real finances, but
based upon the real stock price movement of London listed stocks. So, what I do is I give
half a million pounds to each of my students, and they trade across various stocks and shares,
foreign currencies and derivatives, and what it allows them to do to experience real world
behaviour and really just understand how the theory doesn’t stand up in practice.
Basically, for me, I still teach the same theories that would get taught on any corporate
finance course, but what it allows me to do for their assessment, their summative assessment
for my unit at level 6, is rather than just saying ‘go away and critique the journals
and critique the theory and provide a 3000 word report’ or whatever it might be…
I actually get them to explain their occurrences of what happened on this platform. So, what
that enables them to do is to tell me whether they made money, whether they lost money,
and why they think that may have been the case. Invariably what that means is that the
theory didn’t work. So, by actually demonstrating that they theory doesn’t work, they have to
show me that they understood the theory and then try and postulate as to why the theory
didn’t work in practice. The benefits this includes; it gives them a more applied knowledge
so it captures their imagination a bit more, but I think more importantly then that, it
shows them that the real world is much more complex and messy than the academic theory
would have them believe. They start on day one really. So, effectively
I introduce it as a key component of the course and then as we proceed through the course,
week by week, they learn about different instruments and then following that education process,
they can then, almost as part of their homework and their reading, they can go away and trade
those instruments in the real world. The actual platform itself is very easy to set up. I
just create a league for a given class in a given academic year. The students compete
against one another, and at the start of each individual class I actually bring up the league
up so they can see how they all rank against each other in a very kind of healthy competition,
to capture their imagination. It is also quite interesting because on Bull Bearings there
are lots of other universities across the UK and globally doing this. 97 UK universities
do it, and so I also show how their aggregate impacts as a class ranks alongside other UK
institutions. So, for instance, last academic year we finished 22nd out of 97 universities,
so it was quite nice to see them gelling as a group to try and out compete their peers
at other institutions. I think, from my perspective, because I come
from a non-traditional academic background, I have the same qualifications but I have
come from experience in the city as well. I used to work in hedge funds and investment
banking, and it was always one of the things that was really impinged upon me was this
notion that the financial markets are not rational, they don’t behave as you would expect
them to behave. I was really keen to translate what I had seen in the real world, so to speak,
into my classroom, because I didn’t want my graduates to leave MMU with this notion that
we have a great book understanding but actually in the real world, they are likely to get
chewed up, for want of a better phrase, when it comes to trades stocks and shares. So,
I really wanted to bring that home, and as well as that I think, you know, the academic
theory can be relatively dry but as soon as you put it in the context of making money,
competing against your friends, incorporating that into the experiential learning of the
assignment, competing against other universities; it suddenly then raps up to bring the motivation
and the inspiration to study more to the students. So, that was kind of a twofold thing: capture
their imagination and also to demonstrate that the real world is different to the academic
one. I keep in contact with a lot of my students
through things like Linkedin. That is how I provide my references. I put them up on
their profiles so they can see them and a lot of the time they will feedback to me,
often when they have been successful at interview or even in their jobs at the moment, and the
word that always comes back is this notion of ‘applied’, you know, they found the applied
nature of my course really useful. It means that when they go to interviews… last academic
year the key thing was Royal Mail, floatation of Royal Mail, and that was a big part of
our course, you know, a lot of my students traded that, made a lot of money off that,
and it meant that when they were in interviews and they were having to talk about contemporary
issues, maybe a moving exchange rate, or something like the Royal Mail share price, they weren’t
just able to comment on it quite articulately, but they actually read a lot about it, they
were passionate about it and they were then able to go on and talk about whether they
had made of lost money using this Bull Bearings platform, and that allowed them to be differentiated
as a candidate compared to other people going for the same position. So that is rewarding
for me as well because I can see that my students aren’t just getting superior learning but
they are translating into graduate positions when they leave.

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