At the University of Wisconsin business school, textbooks aren't the only way graduate students learn about how the stock market works. They are also given more than $1 million dollars to test it out for themselves.
For an entire school year, about dozen students are divided into two teams that invest in stocks and bonds, using money donated and earned since the program began 26 years ago.
"This was a full-time job, and I was a part-time student," says Steve Share, a 1996 graduate who took the intensive course.
Wisconsin's Applied Security Analysis Program is one of more than 40 programs at universities across the US that now offer students hands-on investment experience with thousands, even millions, of real dollars.
Through extracurricular clubs or for-credit courses, students make market plays using private donations or money from university endowments. Their decisions to buy and sell are overseen, but generally not vetoed, by faculty in the schools' finance departments.
"Most of us have found it to be a win-win proposition," says Edward Lawrence, chairman of the finance department at the University of Missouri, St. Louis, and one of the only people who have followed the rise in recent decades of "student investment funds."
Dr. Lawrence says the students, the universities, and the investment industry all gain as a result of these programs.
The programs, which date back to the 1950s, have grown over the years in response to criticism that business schools focus too much on theory and not enough on training.
"It's a way to put the students in the driver's seat and get them beyond the textbook," says Stephen Buser, chairman of the finance department at Ohio State University's college of business in Columbus. Ohio State has the largest program in terms of assets, with $10 million in endowment money being managed by students.
The performance of the student funds has been good on average. "We really haven't had any that have been a disaster," Lawrence says. He found that 15 funds reporting calendar-year results for 1992 had an average total return 1.2 percentage points better than that of the Standard & Poor's 500 stock index. Both Wisconsin and Texas Christian University in Ft. Worth, which manages about $1.3 million, say their funds have been on par with the S&P 500 over time.
The styles of the programs differ. At Wisconsin, the students are usually in their second year of a master's degree in finance. The course is not currently open to MBA students because it demands so much time in one area.
"Their program is the Cadillac of programs," Buser says, citing the resources and faculty dedicated to it.
Wisconsin alumn Stephen Petersen says he was able to "hit the ground running" when he went to work for Fidelity Investments as an analyst in 1980.
"What makes the program unique," he says, "is that you basically learn all aspects of investing in a condensed period of time." Mr. Petersen is now the manager of Fidelity's Equity-Income and Balanced mutual funds.
At Ohio State, the students are usually MBA candidates who take the course for one quarter. Texas Christian, like Wisconsin, also has a year-long course. About 22 students participate.
Some funds are extracurricular activities. At Missouri, Lawrence says its $30,000 investment club is open to undergrad or graduate students in any major.
The University of Pennsylvania's Wharton School has 12 students together investing $100,000 as part of the Wharton Fellows Fund. The extracurricular activity, still in its first few years, is for MBA students.
Regardless of what kind of program it is, the exposure it gives students to investing appears to make them appealing to employers. Most students in Wisconsin's program are grabbed fairly quickly by the investment community - sometimes even when they've barely gotten their feet wet.
"Employers are coming in earlier and earlier," says Mark Fedenia, the finance professor who has run the program for the last 12 years. He says that Wall Street companies like Goldman, Sachs & Co. and Morgan Stanley & Co. traditionally recruit in the first semester - something he frowns on.
"I try and ask them to wait," Dr. Fedenia says. He says it takes at least one full semester before his students have enough experience to present themselves well.
Lawrence expects the number of student-run funds to more than double in the next 10 years. "I see no downside" to the programs.