Research RS ORIGINAL AND APPLIED RESEARCH Stock market trading simulations: Assessing the impact on student learning C. Michael Smith and Sharon C. Gibbs

Research RS ORIGINAL AND APPLIED RESEARCH

Stock market trading simulations: Assessing the impact on student learning

C. Michael Smith and Sharon C. Gibbs

Business Administration & Economics, Roanoke College, Salem, VA, USA

ABSTRACT
In higher education, business students with different learning styles may not all respond
successfully to a straight lecture format. The authors analyze the impact that an experiential
learning activity (an optional stock market trading simulation) has demonstrated on student
success in a college investments course. Findings suggest that students who engage in the
experiential learning component earn higher overall grades and demonstrate substantially
higher grade improvements over the course of the semester than do those who do not par-
ticipate in the simulation. This study reinforces the existing literature and supports the
hypothesis that experiential learning components do aid in student learning.

KEYWORDS
Experiential learning;
investments courses;
simulations; stock market

Introduction

In college classrooms around the country, many busi-
ness and finance professors have a tradition of teach-
ing in the manner in which they, themselves, were
taught—the traditional lecture (Becker & Watts, 1995;
Siegfried, Saunders, Stinar, & Zhang, 1996). There is
no denying that “lecture” is a popular and efficient
method of delivering information to a group of stu-
dents. In fact, the relative efficiency and the degree of
comfort that many professors feel toward the lecture
format may partially explain the continued popularity
of the college lecture despite an increasing portfolio of
criticism as to its effectiveness (Renner, 1993). It has
been argued that while lectures have some strengths,
they are overly passive and often do not provide for
an appropriate level of student feedback. In addition,
according to Cashin (1985), they may not be appro-
priate for the complex material often covered in col-
lege finance classrooms, as “the more difficult the
material becomes, the more individual differences
among students are going to influence the pace and
level of students’ learning” (p. 2).

Perhaps due to the expanding body of knowledge
surrounding more student-focused teaching methodol-
ogies, the preference for many professors to only utilize
lectures in their classrooms has been changing. In fact,
there is much research that demonstrates an increase in
the effectiveness of student learning when instructors
incorporate experiential learning components into an
otherwise lecture-intensive course (Kolb, Boyatzis, &

Mainemelis, 2001; Ramaswamy & Ramaswamy, 2016).
While the traditional lecture is likely to remain as the
core pedagogy for many professors teaching finance,
some are finding ways to incorporate additional experi-
ential teaching elements that may significantly increase
student learning opportunities (Brau, Nelson, &
Sudweeks, 2015; Egbert & Mertins, 2010; Hawtrey,
2007; Marriott, Tan, & Marriott, 2015; McNamara &
McNamara, 2019; Park, 2010). In fact, some educators
even suggest that all finance faculty should attempt to
incorporate student-focused elements into their cur-
riculum because of the ability of experiential activities
to significantly enhance the skills of future finance
graduates (Black, 2000), but the literature available on
the effectiveness of incorporating experiential activities
into finance-related courses remains relatively minimal
(Akimov & Malin, 2017).

Despite the lack of literature on the effectiveness of
experiential activities in finance, the reasoning behind
the increased use of experiential learning components
in college coursework may be due to several reasons.
First and foremost, there is some research that dem-
onstrates that students do learn business and finance
better when experiential components are included in
the class (Branch, 1975; Brau et al., 2015; Marriott
et al., 2015; Park, 2010). In addition to the potential
for improved learning opportunities, this increased
interest by college business professors may also be
partially due to the fact that faculty, students, and
classrooms are becoming more technology capable

CONTACT C. Michael Smith cmsmith@roanoke.edu Roanoke College, Business Administration & Economics Department, 221 College Lane, Salem,
VA 24153, USA.
� 2019 Taylor & Francis Group, LLC

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2020, VOL. 95, NO. 4, 234–241
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(Shaw, 2001). The proliferation of technology and
media is likely aiding college instructors in finding
that they are able to add experiential components to
their courses without sacrificing contact time or
important material.

Another consideration for the inclusion of experi-
ential activities into the classroom is due to the chang-
ing nature of today’s student learner. Every generation
has its own value systems, which will likely differ
from those of previous generations (Bengtson &
Kuypers, 1971). The current generation of students is
no exception. College students today are considered
part of Generation Y, or the millennial generation.
According to Black (2010), this generation learns bet-
ter in an active environment and by experimenting to
apply concepts. “Today’s students simply plunge in
and learn through experimentation and active partic-
ipation” (Black, 2010, p. 99). One of the interesting
reasons for the trend to this more active learning style
is that, more than any other generation, the millennial
generation grew up playing video games. They have
always been able to actively engage themselves into a
game and receive instant feedback based on their
decisions and actions (Oblinger, 2003). Therefore, it
may be that utilizing experiential learning activities
(e.g., a game or simulation) in the classroom provides
millennial learners with a learning design in which
they are already quite familiar. They are able to learn
concepts in a controlled environment and receive
instant feedback based on their decisions; much like
that of a video game.

Given the increasing opportunities and interest by
college faculty to include experiential elements into
their curriculum, it is important to consider the meth-
ods and goals of experiential learning before attempt-
ing to introduce a suboptimal experiential component.
The premise of experiential learning is that students
are best able to learn and retain new information
when they are provided with the opportunity to tac-
tilely engage and experience the underlying subject
matter. This can be accomplished in numerous ways,
but some of the most popular methods associated
with experiential learning include case studies, intern-
ships, research, simulations, and other methods that
allow students to personally involve themselves in the
learning experience. However, it is important for fac-
ulty interested in incorporating experiential classroom
components to recognize that not every experiential
activity is met with immediate success. In fact, minim-
ally guided efforts to incorporate experiences into the
classroom can be a waste of time and result in
abstract failure (Kirschner, Sweller, & Clark, 2006). By

following several guidelines, college instructors may
increase their chances of successful implementation.

Fortunately, there is a relative abundance of infor-
mation available that can aid business and economics
faculty in developing successful experiential elements,
as the concept of experiential learning is not new
(Cassidy, 2004). John Dewey (1938) first introduced
the idea that learning might be enhanced by active
engagement in the late 1930s. However, the concept of
experiential learning began to gain significant traction
in the 1980s, when David Kolb (1984) laid the founda-
tion for the impact that experiential learning might
have on different student learning styles. Building on
the work of Dewey (and others), Kolb suggested that
learning is most successful when the learner is able to
cycle through four distinct processes. The cycle begins
when the learner is able to experience something con-
crete and then given time to reflect on the experience
in an attempt to find its meaning. The learner is then
able to use this knowledge to conceptualize abstractly
and draw conclusions from the experience. The last
stage of the learning process occurs when the learner
begins to test and experiment the conclusions that then
lead to new experiences—and the cycle continues once
again (see Figure 1).

For an experiential exercise to be successful in the
classroom, it is important for instructors to consider
the student’s opportunity to progress through all four
of Kolb’s processes. According to Svinicki and Dixon
(1987), “by constructing learning sequences that lead
students through the full cycle, an instructor should be
able to foster a more complete learning than can be
gained from a single perspective” (p. 142).

Research question

The purpose of this study is to provide an assessment
of the results obtained from the inclusion of a specific
experiential learning activity in a college investments
class. The experiential learning activity utilized in this
research is one that many faculty in investments

1. Concrete
Experience

2. Reflective
Observation

3. Abstract
Conceptualization

4. Active
Experimentation

Figure 1. Kolb’s experiential learning cycle.

JOURNAL OF EDUCATION FOR BUSINESS 235

already use—the stock market simulation. To increase
the reliability of the findings, the implantation of the
course’s experiential activity has been tailored to fol-
low the guidelines provided by Kolb’s model as care-
fully as possible. In summary:

� Students are provided with a concrete experience
as the simulation provides a real-life trading
experience. While the concept of a brokerage
account is described in detail before the start of
the simulation, the simulation is designed to
behave just like a standard online brokerage
account in which students can actively engage.

� The simulation is conducted over a 10-week
period. Students must stay engaged from start to
finish and each student is incented to earn a posi-
tive return by the conclusion of the simulation.
Each week a “leaderboard” is discussed by the
course professor in class and students are encour-
aged to describe their successes and failures.
Students can reflect on their decisions (as well as
the decisions of their classmates) and revise their
buy-sell-hold strategies as they learn what works,
and does not work, for them.

� As the student is rewarded or punished for tak-
ing on risk with positive and negative returns,
these lessons can then be reflected upon and
revised as the simulation continues. Students
learn more and more effective methods to capit-
alize on the risk-return relationship over the
course of the semester, and they are able to
apply their own risk tolerance, investing style,
and return goals to their asset allocation and
security selection decisions.

� Over the course of the semester, more and more
investing strategies are covered in-class (including
modern portfolio theory, behavioral economics,
fundamental and technical analysis). In addition,
futures and options are discussed toward the con-
clusion of the simulation. Students can experiment
with new strategies as they learn them or stick
with their own personal strategy. Experimentation
is encouraged in class by the course professor, as
“this is only a learning experience and taking big
risks may pay off.”

Given these parameters, does a properly conducted
experiential activity included with classroom lecture
increase overall student learning? This study assesses
the impact that student participation in the online
trading simulation has on performance in a college
investments class.

Method

To test the impact that the experiential exercise has
on student success, a sophomore/junior-level invest-
ments course is examined in the Business
Administration and Economics Department at
Roanoke College, a small private college in Virginia.
In this course, the learning objectives are stated
as follows:

� Gain an improved understanding of financial
securities and markets;

� Develop the ability to analyze investment compa-
nies, common stocks, and bonds for invest-
ment decisions;

� Understand how option and futures contracts are
used in hedging and speculating;

� Understand stock/bond indexes and how they are
used by investment advisors;

� Understand how to apply security analysis techni-
ques in relatively efficient capital markets; and

� Gain practical experience in trading securities
and in presenting investment analysis
recommendations.

These course objectives are primarily addressed
through a lecture/discussion format utilizing
Investments: Fundamental Theory & Practice (Smith,
2017) as the primary reading text and A Random
Walk Down Wall Street (Malkiel, 2015) as a supple-
mental text.

As stated previously, the experiential activity uti-
lized in this course is a security trading simulation
that students set up online using their own computer
or device. While several simulation options are avail-
able, StockTrak (StockTrak Global Portfolio Solutions,
Montreal, Canada) is the simulation software package
used in this course. StockTrak provides students with
a virtual trading platform that simulates a real online
brokerage. The course instructor has some flexibility
to be able to set the parameters of the simulation
before the beginning of the semester. Therefore, the
instructor can create some trading limitations or
increase the package’s optionality based on the desired
material to be covered over the course of the semester.
Upon registration for the simulation in this particular
investing course, each student’s portfolio begins with
$500,000 in cash (as set by the professor) that can be
invested in stocks, bonds, mutual funds, exchange-
traded funds, options, and futures.

Since the spring of 2011, the Stock Trak trading
simulation has been provided to students as an extra-
credit opportunity each semester. Students are not

236 C. M. SMITH AND S. C. GIBBS

required to compete in the 10-week trading simula-
tion, but may choose to participate. To entice student
participation in the simulation, students are informed
in the syllabus that if they are able to successfully
meet the stated guidelines before the trading period
ends, they may receive an extra 10 points that will be
added to their final exam score. In addition, the class
“winner” (the one student with the largest portfolio
value at the end of the semester) receives an add-
itional 10 points on the final exam. To receive the
extra credit, students must stay engaged over the
course of the semester (by participating in weekly
class discussions) and meet the following guidelines:

� Register with Stock Trak and purchase a portfolio
of at least five securities no later than [start date].

� Make at least two trades each week during
the game.

� Complete a minimum of 20 total trades before
[end date].

� Each position taken in an asset should be a min-
imum of 5% of total assets.

� Cash should not exceed 20% of the total portfolio
at any time.

� Over the course of the semester—at some point,
each student must:
� Buy a minimum of one call option or one

put option
� Write a minimum of one call option or one

put option
� Buy or sell a futures contract
� Shorting stocks is optional (but allowed—and

count as trades … )

Sample description

The trading simulation has been a component of the
Investments course at Roanoke College from 2011 to
2017. Over the six-year period, 129 students met the
previous requirements and received the extra credit.
Seventy students either decided against participating
in the simulation or otherwise failed to meet the
stated requirements. Of those, 58 students had no
exposure to the course’s experiential trading simula-
tion as they never registered to participate in the
simulation. An additional five students also missed
out on the entire experiential component as they reg-
istered for, but then never signed back on to, the
simulation to place any trades.

Of the 129 students who participated in the simula-
tion, 97% were between the ages of 19 and 22 years
old, and 76% were men. The course is not a core

requirement of the business administration major, so
it can be inferred that most students taking the
course, and participating in the simulation, have a
genuine desire to learn about investing. Informal poll-
ing at the beginning of the semester suggests that
almost all students taking the course do not believe
that they will receive Social Security (at least in its
current form) and feel that they will not have their
retirement years as “financially easy” as their parents
without investing for themselves. Because of this,
approximately half of the students in the course state
that they keep up with the stock market on (close to)
a daily basis.

The Investments course at Roanoke College has
several prerequisites, including courses in accounting
and economics. Therefore, every student who takes
the investing course should have a basic understand-
ing of equity and fixed-income markets before signing
up for it. In fact, approximately 10% of students in
the course have had significant exposure to the stock
market and keep up daily with specific news items
that impact stock prices as they are also enrolled (or
have previously been enrolled in) Roanoke College’s
Student-Managed Fund. In this course, students are
responsible for investing a portion of the college’s
endowment in the stock market. These students must
consistently keep up to date with investment markets
and make real-world decisions regarding the buying
and selling of securities. Interestingly, every student
who had been exposed to the Student-Managed Fund
also made the decision to compete in the
StockTrak simulation.

Other than those students who trade for the
Student-Managed Fund, almost no students trade
using a brokerage account of their own (less than 5%
on average). However, this percentage has been grow-
ing. Recent classes have self-reported greater usage of
online security trading applications. In particular,
Robinhood (Menlo Park, CA), a commission-free
equity trading app that students can create and main-
tain on their personal communication devices appears
to be the most popular. This particular online broker
has very low investment minimums, which may make
it more appealing to students who generally have little
to no discretionary income. It is again interesting to
note that these students do not tend to make the
same investment decisions with their own personal
investing as they do in their simulation investing (per-
haps due to the competitive nature of the simulation
and its requirements).

JOURNAL OF EDUCATION FOR BUSINESS 237

Primary variable

To analyze the success of the course’s experiential
component, student grades are used as the primary
variable to compare those students who participated
in the experiential simulation versus those who did
not. By using this quantitative measurement, this
study adds to the existing literature already conducted
on the inclusion of stock market simulations in inves-
ting courses, as student survey responses have been
the popular measuring tool utilized in prior research
(Marriot et al., 2015).

Hypothesis 1

Is a student’s participation in an experiential online
trading simulation related to the student’s overall per-
formance? To address this question, the research iden-
tifies if the utilization of the trading simulation helps
students gain a stronger understanding of the overall
material in the investments course over those who do
not participate.

To test this hypothesis, the course grades of stu-
dents are collected and labeled as either with simula-
tion or with no simulation. As participation in the
simulation earns students extra credit, these extra
points are removed before any other calculations are
performed. Once the extra credit has been removed,
for the purposes of this hypothesis, m1 equals the
mean scores (the final course grades) of those students
who have participated in the simulation, and m2 equals
the mean scores of the final course grades for those
students who have not participated in the simulation
(or otherwise failed to meet the simulation
requirements).

As it has been argued in prior research (Kirschner
et al., 2006) that ill-conceived experiential components
can actively detract from student success, a two-sided
t test is used to compare the mean scores.

H0: m1 – m2 ¼ 0 against H1: m1 – m2 6¼ 0

Hypothesis 2

While it was determined that the results of the first
hypothesis would be interesting, there is an obvious
threat to the validity of the results of this hypothesis.
There is a potential likelihood that students with the
predilection to complete extra credit assignments may
just, in fact, be stronger students (as reflected by
course grades). Simply, it is possible (if not likely)
that these students were going to earn higher course
grades with or without participation in an optional

experiential activity because they are simply more
dedicated to their studies.

To begin to address this question of validity, a
second hypothesis has been devised. Does participa-
tion in the experiential trading simulation positively
correlate with a student’s individual improvement
over the course of the semester? More specifically,
does the utilization of the trading simulation help stu-
dents to demonstrate improvement over the course of
the investing class that is superior to those who do
not participate?

To test this hypothesis, the grades for the first
exam are compared with the final course grades for
each student to measure the student’s individual grade
improvement. It is important to note that in each
tested semester, the first exam is completed before
student participation in the simulation begins. The
subject matter covered in this period before the simu-
lation begins includes the basics of investing, using
brokerage accounts, investment markets, and basic
stock and bond investing. Students take the first exam
on these topics before they have had the opportunity
to create their online trading simulation portfolios
(the course’s experiential component). The course
schedule allows the trading simulation to begin shortly
after the completion of the first exam. However, stu-
dents are required to continue to participate in the
simulation for the remainder of the semester after the
first exam. While participating in the simulation, stu-
dents complete two additional exams, take two quizzes
based on the Malkiel text, and complete a comprehen-
sive security analysis project. While the first exam rep-
resents 15% of the total course grade and 5% is based
on student attendance, 80% of the total course grade
is earned from exams and other assignments that are
completed while the students are competing in
the simulation.

For the purposes of this hypothesis, m1 equals the
mean scores of the difference between the course
grade (the extra credit associated with successful com-
pletion of the trading simulation is once again
removed) and the first exam for those students who
participate in the simulation. Further, m2 equals the
mean scores of the difference between the course
grade and the first exam for those students who do
not participate in the simulation. As an example, if a
student earns a 77 on the first exam and finishes the
course with an 82 average, that student’s grade
improvement is calculated as five points (82–77 ¼ 5).
On the other hand, if a student earns an 85 on the
first test, but finishes the course with an 81 average,

238 C. M. SMITH AND S. C. GIBBS

that student’s grade improvement is calculated as
negative –4 points (81–85 ¼ �4).

The mean scores are then compared utilizing a t
test with the same parameters as described in
Hypothesis 1.

H0: m1 – m2 ¼ 0 against H1: m1 – m2 6¼ 0

Results

Before testing Hypothesis 1, descriptive statistics are
run on the data to provide insight into the overall
course grades for the students. The results show that
students who participate in the trading simulation do
earn a higher course grade (83.5%) than do those stu-
dents who do not participate (77.5%). See Table 1 for
more information.

When the t-test is run on the data, the p value of
.00 is below the .05 level of significance; thus, the null
hypothesis is rejected and it is concluded that the two
groups (those who participate in the simulation and
those who do not) are not equal. The course grades of
the students who participate in the simulation are
statistically higher than the course grades of students
who do not participate in the experiential activity. See
Table 2 for more information.

This result does lend credence to the idea that
experiential components (e.g., a simulation) may aid
student learning efforts. Though, as was previously
stated, this correlation may not be completely due to
the potential for increased learning because of the
course’s experiential component. As random assign-
ment to groups is not possible, self-selection is a real
risk to the validity of this finding as it can be easily
argued that students with stronger dedication, will
naturally gravitate toward extra-credit opportunities
whereas less devoted students may choose to forego
these opportunities. However, the opposite point can
also be intuitively argued. Wouldn’t lower-performing
students possibly be even more motivated to partici-
pate in an extra-credit opportunity? Without random

assignment to groups, determining causation is not
possible. Regardless, for the sake of this experiment,
students who participated in the simulation performed
better in the course.

To further test the significance of the finding that
students who participate in the simulation perform
better than those who do not, Hypothesis 2 is tested.
Hypothesis 2 examines student improvement rather
than an overall score. When looking at the descriptive
statistics (Table 3), it is noted that students who par-
ticipate in the simulation enjoy a higher mean per-
formance improvement than those who do not
participate. Students who participate in the online
trading simulation tend to improve twice as much
(from their first exam grade to their overall course
grade) than do those students who do not participate.
The average improvement for those students who par-
ticipate in the simulation is six points, whereas those
who do not participate improve by only three points.
More specifically, the average first test score for stu-
dents who participate in the trading simulation is
77.2% and their final course grade is 83.5% for an
improvement of 6.2 points. The average test score for
those students who choose not to participate in the
experiential trading component is 74.5% and their
final course grade is 77.5% for an improvement of
only 3.0 points.

Once again, a t test is run on the data to test for
significance, and once again the results indicate that
the two groups are not equal. The improvement that
those students who participate in the simulation
exhibit is statistically higher (p ¼ .019) than that of
those who do not participate. See Table 4 for more
information.

As with the results of the test of Hypothesis 1, this
finding also supports the research that demonstrates
that experiential learning components, as a part of an
otherwise lecture-intensive course, can aid student
learning. In addition, this result arguably adds more
power to the finding in that self-selection is removed
as a significant threat. The stereotypical “good”

Table 1. Course grades: Group statistics.
Student n M SD SEM

No simulation 70 77.4921 10.57414 1.26385
With simulation 129 83.4919 7.01772 0.61788

Table 2. Independent samples test on course grades.
Levene’s test for equality of variances t test for equality of means

95% CI of the differenceF Sig. t df Sig. (two-tailed) Mean difference SE

Equal variance 6.689 .010 �4.8 197 .000 �5.999 1.252 [�8.47, �3.53]
Not equal variance �4.3 102.8 .000 �5.999 1.407 [�8.79, �3.21]

Table 3. Grade improvements: Group statistics.
Student N M SD SEM

No simulation 70 3.0257 9.85935 1.17842
With simulation 129 6.2163 7.30320 0.64301

JOURNAL OF EDUCATION FOR BUSINESS 239

students would be just as motivated to perform well
on the first exam as they would on every other com-
ponent of the course. The improvement score is the
difference between the student’s overall course per-
formance and their performance on the first exam.
The students who participate in the simulation, per-
haps due to the increased learning opportunities pro-
vided by the experiential learning component (the
simulation), exhibit a higher level of learning (as
expressed by their grades) than do those who do not
participate in the simulation.

Conclusion

While every classroom is different, this study lends
support to the idea that experiential activities, when
structured properly, can increase student learning and
performance. As mentioned previously, the …

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