GameStop - using current news to understand markets and to critically examine opinions and facts.

It seems that every year, some incredibly unique event occurs during the early part of the semester that simply cannot be ignored in terms of the magnitude of the impact, or the questions it raises about the underlying structure of organized financial markets. The recent events surrounding GameStop are useful to better understand some important issues about investing and trading, about market structure, regulation, and about society, politics, and group dynamics. Importantly, there are not predetermined correct or incorrect answers about the causes and effects, and we are only in "the middle innings" at best at this point, but it seemed like an important, and widely available case to use to deepen our thinking about financial markets and the major events that shape them through time.

After reading and discussing the items below, and any other sources you wish to consult, answer the following questions, neatly formatted in a Word document. You must complete the written portions on your own. You can consult Investopedia, WikiFinance, and any other on-line sources as background too.

1. Using Yahoo Finance or any other source, look up the stock price for GameStop (GME) on January 27^th, 2020 and on January 27^th 2021.

a. What was the continuously compounded rate of change in one year?

b. What was the arithmetic rate of change in one year?

c. If you had invested $35,000 in GME (about the total all-in cost of a year's college) on 1/27/2020 and sold on 1/27/2021, how much money would you have upon sale?

d. Where do the equivalent losses to offset your gains now reside? Think about and include your thoughts about the clearing process, any future obligations on others created by your sale, and what happens if the "market" breaks down through a legal end of trading before all long and short positions are liquidated. Note: There is not a single correct answer....

e. Do you believe that stock prices of publicly traded companies should be primarily related to the earnings of the underlying company? Why/why not?

f. What is a hedge fund? (be brief but accurate -

g. Do you think Robinhood is at fault or acted responsibly in halting trading?

h. Would your opinion about GameStop differ if the primary investors and short positions had been held by managers of University of Illinois Professors' retirement funds? Should the identity of the counterparty matter in a trade or not? Should they even be known? (1 short paragraph max)