The ups and downs of the stock market have special significance for 42 juniors and seniors studying finance at DePaul University’s College of Commerce this year. The students are participants in the Driehaus Virtual Stock Portfolio Competition, a new computerized challenge that pits 11 DePaul student teams against each other to see who makes the best decisions in managing a simulated portfolio of $200,000 in small company stocks.

The competition is the brainchild of Chicago investment fund CEO Richard Driehaus, a DePaul alumnus and founder of Driehaus Capital Management, Inc., which manages institutional portfolios and mutual funds worth more than $3 billion. Driehaus envisions the DePaul contest as a model for a future Chicago-area competition involving several colleges.

“The goal is to give students real world experience,” said Ann Marie Klingenhagen, a DePaul finance instructor who is overseeing the competition. “It exposes students to different methods of investing, fundamental investment research and making investment decisions.”

Although the students’ mock stock trades are made with digital “funny money,” the prizes that Driehaus will award to the top three teams are real cash—$20,000 for first place, $12,500 for second place and $7,500 for third place. The competition concludes in May. Each team started in October with $200,000 in virtual cash and a challenge to create a simulated portfolio fund of stocks issued by real firms listed on the Russell 2000, an index of 2,000 small company stocks.

Teams are required to choose a growth or value investment strategy, research eligible firms and, based on this research, choose stocks for the team’s portfolio. The teams are encouraged to balance their portfolios by selecting stock from multiple business sectors. One reason small company stocks were chosen for the competition is that fewer analyst reports are available for these companies, so students are forced to do their own research about the firms’ products, management and financial outlooks. Students make their virtual stock trades on a password-protected competition Web site that automatically tracks each team’s portfolio performance based on actual daily market data.

Like real investment managers, the teams are required to make quarterly reports. They also must outline the rationale for portfolio decisions in regular presentations to DePaul finance faculty and Driehaus. Prizes will be awarded in June based on both qualitative and quantitative measures, including portfolio return, consistency of investment style, adherence to competition guidelines, stock selection rationale and the level of portfolio risk.

“The real purpose is not the dollars, but to learn about investing,” Driehaus told the student teams in a taped message played at the competition kick-off event. “The objective is not the highest return, but to learn about the market. The ones that apply themselves and are aware of what’s going on in the market are the winners in the long run.”

Competitor Cem Savas agreed with Driehaus. “I think it’s a great idea to learn how to invest in the real world, even if you’re using virtual money,” he said. “You’re not just learning from books. It allows you to find out if you’ll like doing this for a professional career after graduation.”

Fellow student Demetrius Petrow said he sees the competition as a good opportunity to test his teamwork skills as well as classroom knowledge. “It’s good to work as part of a team because, in the real world, when you make investments, you are not doing it by yourself,” he said. “There’s more responsibility involved when you work with a team to plan and develop a strategy.”