STOCKS FROM A TO Z
BOOSTERS OF VIRTUAL COMPETITIONS LAUD EDUCATIONAL
VALUE, BUT OTHERS FEAR BAD LESSONS LEARNED
By Dolores Kong
03/19/2000
The Boston Globe
Handel Obas, 18, watched the stock market ticker move
across the bottom of the television screen in his
social studies class at Roxbury's John D. O'Bryant
School, went back to his desk, and debated what to do.
"Oracle was at 77. Now it's at 85, a 52-week high. So
what do I do? It's at 85," said Obas, a 12th-grader at
the high school specializing in mathematics and
science.
"I think you should wait until it goes down," said
classmate Hector Felix, 17. "I think it's too high,"
agreed Obas. "I don't know."
By the end of the class period Wednesday, Obas, Felix,
and classmate Rodley Doriscat, 18, decided to add
Oracle and another technology giant, Sun Microsystems,
to their stock portfolio.
Their portfolio, of course, is hypothetical. The three
students are among the 30 or so 11th- and 12th-graders
in this class taught by Frankie Lee Hall who are
participating in a nationally organized virtual stock
market competition. Such contests have become an
increasingly popular way for participants, from grade
school to business school, from novice investors to
professional money managers, to learn stock-market
basics or try out advanced investing techniques.
Begun in a pencil-and-paper format by a securities
industry foundation more than 20 years ago as a way to
educate students about the US economic system and the
role of the securities industry, virtual stock market
competitions have gone big time and online. Their
growth parallels the booming interest in financial
markets, the Internet, and do-it-yourself investing.
But while supporters of these competitions say they
are a valuable tool for educating children and adults
about financial markets, others worry about the
lessons being learned, especially by youngsters. They
point to some contests that allow frequent real- time
"trading," "borrowing" to buy stocks, and six-figure
virtual portfolios, dollar amounts that may be too
large for some kids to fathom. They question whether
some competitions are, in fact, promoting day trading
and risk-taking.
"I'm all for teaching kids in school about how markets
work and what prudent investing is," said Marvin
Steinberg, executive director of the Connecticut
Council on Gambling Problems. The council has
developed an online self-scoring quiz on gambling in
the financial markets at the request of the US
Securities and Exchange Commission.
But if a competition encourages students to take high
risks and make frequent trades in a short time frame,
Steinberg said, "It's teaching the wrong thing and
creating future day traders."
Ted Murphy, president of MarketPlayer.com, which runs
a number of virtual stock competitions - including a
new Fidelity Business School Investment Challenge,
which was organized by three Harvard Business School
students, and a nationwide CNBC Student Stock
Tournament - disagreed.
"I think there is a place for trading and there is a
place for buy and hold," said Murphy. "An individual
investor has to figure out where their place is in
that spectrum." And the best way for a person to
figure out which investing style works is "by playing
in stock competitions. You can't get it from books or
self-styled experts. It's just not possible."
MarketPlayer.com of Connecticut claims it offers
institutional- quality stock screening and charting
tools, allowing contestants to mimic the investing
styles of everyone from Warren Buffett to money
manager Ken Heebner.
Worldwide, hundreds of thousands of people are
estimated to be participating in stock competitions at
any given time - whether through the original
paper-and-pencil version of The Stock Market Game that
the O'Bryant School students are participating in, or
through the latest online versions on such sites as
www.MarketPlayer.com, www.Yahoo.com, www.Sandbox.com,
www.CNBC.com, www.mock-market.com, and www.investment
challenge.com.
At the Harvard Business School's Kresge Hall one
recent afternoon, the three organizers and some of the
participants in the Fidelity- sponsored challenge
among 10 top business schools discussed the contest
and what they're learning from it. The first
nationwide business school challenge, which began in
February and ends next month, offers more than $10,000
in cash prizes from Fidelity.
Working on a consulting basis with the privately held
MarketPlayer.com to set up the contest provided a
chance to "get experience with a start-up and put
together a fun event," said Jeff Cassidy, 27, a native
of York, Maine, and a first-year business school
student who organized the competition with classmates
Jeff Gatto, 29, from Pittsburgh, and Greg VandenBosch,
27, from Flint, Mich.
For the Harvard Business School students in the
contest, it's a chance to try their hand at investing
and test strategies without risking their own money.
"I'm up another 4 percent today," said Tony Leness,
28, a native of Manhattan, as he checked his virtual
portfolio online in Kresge Hall.
Leness said he checks three or four times a day. His
high-risk portfolio jumped more than 60 percent in the
first two weeks of the 10-week competition, placing
him first out of more than 1,000 participating
students nationwide as of the beginning of March. But
Leness, who used to work for a private equity firm,
acknowledged: "We have a long way to go."
Classmate John Alford, 25, a native of Brooklyn and a
former General Motors engineer, hasn't had much luck
with his stock picks so far. "I'm bleeding right now,"
he said. Even though he ranked 279th out of 1,009
nationally as of a couple of weeks ago, Alford said,
"the difference between 279 and 1 is tremendous."
Another Harvard Business School participant, Bethlehem
Shiferaw, 27, a native of Ethiopia who used to work
for a New York investment banker, said she and several
women in her class had formed a group - the "think
tank" - to discuss business, initial public offerings,
and the stock market, and the virtual competition has
been another learning tool for them.
"It's not necessarily where you stand, but why you
picked what you picked," said Shiferaw, whose
portfolio ranked 28th early this month. When it came
to their own money, she said, some women in the group
either "had been day traders, almost, or never
invested."
But the focus of concern about virtual stock
competitions is not on MBA candidates, but on children
and adolescents.
Donna Haggarty, national director of marketing for the
Securities Industry Foundation for Economic Education,
draws a distinction between the nonprofit group's
competition and those run by for- profit companies.
"Our focus is really education," she said. "We're
completely noncommercial. We do not hold big-money
competitions."
Her national organization runs The Stock Market Game,
the first market competition, which has involved more
than 6 million students since it began more than 20
years ago. The Boston Globe's Newspaper in Education
Program coordinates the competition in Massachusetts
and New Hampshire schools, including the John D.
O'Bryant School in Roxbury, whose participants compete
against other high schools in the state. The fee is
the cost of a Globe subscription during the 10- week
competition, with two newspapers per student team
required, and the first-place prize is a $50 US
savings bond.
In addition, said Haggarty, "Our teaching materials
suggest responsible participation in the stock market
requires a long-term perspective, a good amount of
research, and some discipline."
But Steinberg, of the council on gambling problems,
who has reviewed the materials for The Stock Market
Game, said: "I have mixed feelings about it and always
have."
Elizabeth Schiever, director of the Colorado-based
National Endowment for Financial Education, which
offers a financial planning curriculum primarily for
high school students, said there's more to financial
education than playing in a stock market competition.
Still, she has found The Stock Market Game and its
supporting educational materials to be excellent and a
"wonderful activity to get involved in."
Another major competition available to students, the
CNBC Student Stock Tournament, sponsored by
Knight/Trimark Group and run by MarketPlayer.com, has
some similar rules as The Stock Market Game: Both
start with a virtual portfolio of $100,000, a
two-month competition open to grades four through 12,
and a virtual commission charge for each trade.
But there are differences, according to a review of
the rules online: The Stock Market Game allows
students to buy stocks on margin and to place
short-sell orders, in which they make money if a stock
price goes down, while the CNBC tournament does not.
The CNBC game offers real-time pricing, while The
Stock Market Game allows only end- of-day pricing.
Neither competition limits the number of trades per
day, although the paper version of The Stock Market
Game for classes without Internet access updates
portfolios only once a week.
CNBC's Web site stresses that its tournament "has been
designed to be a fair, representative contest," and
that the rules have "been designed to encourage
prudent, knowledgeable investing." The winning school
receives 100 shares of pre-split General Electric
stock, worth about $13,650 on Feb. 7.
In the CNBC online tournament, a Holyoke High School
team called the HHS Knights finished in first place
for the week ending March 3, after it made 27 trades
in one week, earning a 77.11 percent total return.
That's according to the CNBC Web site, which features
a photo of the team members. The team's most
profitable individual transaction was a next-day trade
of Hudson, N.H.-based Micronetics Wireless Inc., which
returned $38,600 in virtual dollars, for a 121 percent
gain.
But students in Frankie Lee Hall's Roxbury social
studies class, which has no Internet access, will have
to wait to find out what price they bought and sold
at.
Team members Jeremy Johnson, Amaury Soto, Lovely
Benoit, and Lekeisha Govan put in buy orders for
Sears, Guess, and The New York Times, holding to the
popular investment philosophy of buy what you know.
Their portfolio already includes Nike and Timberland.
Classmates Obas, Felix, and Doriscat won't know
whether they bought Oracle at a 52-week high or on a
dip until the next weekly update. They favor
technology, with holdings in America Online, Cisco
Systems, and Aware Inc. of Bedford.
As the bell rings, the last thing students see as they
file out is a note taped to the door: "If you want to
make money, you have to be willing to be bored. - Mr.
Hall."