IN2 IN1 with private forecasts

Two indices and a forward on the second trade together. Each trader type receives its own forecasts.

Objective

Finish with as much wealth as possible. Assessed on final wealth.

What it shows

• Private forecasts of the same value, each with its own error.
• Two groups trading a forward on information the other does not have.
• Price moving toward the average of what the room knows.

Watch out for

• A forecast that differs from the price, taken as a signal when it is noise.
• Forecasts that arrive on a timetable, so a trader may act before or after the next one.
• Orders of up to 10,000, large enough to move a thin book.

Who takes part

• Fund — half the class. Trades IDXA, IDXB and IDXBF, a forward on IDXB. Receives private forecasts of both indices.
• Dealer — the other half. Same instruments, forecasts that differ from the fund's.

Class size

Twelve to forty students, split evenly between the two types. With fewer than twelve, one side of the forward is easily empty.