Interesting. I could see this as the intellectual genesis of an entirely different game. Imagine tying the virtual market to Bitcoins!
One comment on being able to short... Based on how the game is described (I may be the only one the planet not to be an active player) it should be possible to short a stock. Every time you get new money, split the purchases evenly between all stock. (Can do a weighted average if you want) Then when you have information (like you're going to kill the CEO) then you have shares to sell on the bad information. It's not a concentrated bet, but you still can effectively short it.
That's not a short, though. You don't profit on the difference between prices, you only get the chance to buy again at a lower price, but not sure if the stock will go back up.
Let's oversimplify for the sake of showing the calculation...
There are 4 stocks in the world, A, B, and C, and D, all trading at $25. I invest $100, buying $25 in each.
Now lets say that I know for sure that stock D will go down because I'm going to whack the CEO. So I sell my $25 of D, and put it in A, B and C (A stake of $33.33 in each - let's assume fractional shares are ok.) If Stock D goes to 0, while the others all double. I have a net gain of $100 - $75 from the stocks I already held, but $25 from the new investment, and I've avoided $25 as well.
Let's say you lived in a world where shorting was ok. If instead you invested $25 in A, B and C, and shorted $25 on D, you would gain $75 in A, B and C, and $25 on your short of D. In essence it's the same $100 profit.
Now this only works if A, B and C are also going up.
Let's say that D does move on the event, but A, B and C don't. If you do buy back D after the event, you ultimately are in the same position in both cases. In the shorting case, you have $100 in securities ($75 original, plus $25 of D bought near 0) and in the "sell now buy later" you sell back $25 of A, B and C to buy at the bottom.
Net - you create the effect of shorting.
This falls apart if you want a very concentrated bet, but it's a way that long-only professional money managers who compete against indexes find a way to effectively short.
The math still holds if you assume buying back after the drop.
Think of it this way - in both cases you're selling today, and buying later. The only difference is the "hold the whole market first" strategy requires more capital. (There are market technical differences too, but for short time periods these aren't as significant)
The only difference is the "hold the whole market first" strategy requires more capital.
That's not the only difference. It's not even the biggest difference. The major difference is that in your scenario you have a big unhedged exposure to the market (your p&l depends on the performance of A,B,C) and in the case of just shorting D you don't (doesn't matter what happens to A,B,C). That's a pretty big difference.
yeah that's not a short at all :/ that's just a long position in all the other stocks and hoping that somehow those stocks have a short position in stock D
One comment on being able to short... Based on how the game is described (I may be the only one the planet not to be an active player) it should be possible to short a stock. Every time you get new money, split the purchases evenly between all stock. (Can do a weighted average if you want) Then when you have information (like you're going to kill the CEO) then you have shares to sell on the bad information. It's not a concentrated bet, but you still can effectively short it.