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National Science Foundation awards $459,798 grant to Iowa Electronic Markets

The University of Iowa's Iowa Electronic Markets (IEM) is putting students to work. With the help of a $459,798 grant from the National Science Foundation (NSF), students can move out of the traditional classroom setting into a hands-on laboratory where they experience real market forces.

The two-year grant will allow 30 four-year colleges serving minority populations and rural community colleges across the U.S to develop and share curriculum intended to promote economic literacy among their students. The grant was awarded to four professors in the University of Iowa Henry B. Tippie College of Business: Joyce Berg in accounting, Robert Forsythe in economics, Tom Gruca in marketing and Tom Rietz in finance.

The project is a collaboration between UI and more than 30 colleges, according to Gruca. Teams of professors from the participating schools will develop course work in conjunction with the UI professors. Much of the IEM curriculum will be accessible for download on the IEM website.

"The goal of this grant is to help teachers incorporate new technology like the IEM and the Internet into their courses to spur active learning and develop technology skills. It's also a way to bridge the digital divide among these schools that may not have had the technical resources in the past," Gruca said.

Berg said the IEM takes an interdisciplinary approach, in areas such as accounting, economics, finance and marketing, and the web-based markets serve as the common theme. "More and more people are finding themselves in markets such as eBay and E*Trade and are able to access huge amounts of information on the web. The IEM teaches students to make smart and quick decisions in these environments," she explained.

Founded in 1988 at the UI, the IEM is a real-money futures market where students can trade shares based on future events, such as presidential elections, a company's quarterly earnings, a corporation's stock price, or a movie's box office receipts. The web site for the IEM is at http:/tippie.uiowa.edu/iem/. Students in courses supported by this grant will receive grant funds when opening their accounts.

This grant demonstrates NSF's support for the "learning by doing approach" to business education, says Robert Forsythe, senior associate dean of the Tippie College of Business

"We believe that through this hands-on approach, students in business, economics, political science and other majors at participating colleges will receive a better understanding of how markets work, how trades are conducted, and how social, economic and political issues affect the economy," he said. "This grant will help more than 60 faculty across the U.S. incorporate a valuable teaching tool into their lessons."

Students use the IEM as a laboratory exercise, learning in much the same way as labs are used in teaching other sciences. A professor teaching a unit on interest rates can use the IEM's market on the Federal Open Market Committee's (FOMC) decision on interest rates, motivating students to study why interest rates are important, the role of the FOMC and what information people use to forecast FOMC actions.

Eric Rahimian professor of economics and chair of the department of economics, finance and office systems management at Alabama A&M University has used IEM in his "Money and Banking" classes twice.

"My students have greatly benefited from the hands-on experience that IEM and particularly the Federal Funds Rate Market has provided for them," Rahimian said. "I consider IEM a step toward bringing the market trade experience to the class environment. My students were paying more attention to the lectures on economic and monetary policies because of the connection to and trade on future markets created by IEM. The nice feature of IEM is that it is a real future market with the necessary features including reward for good decision making and using expectation and personal judgement to maximize one's rates of returns on investments."

The grant comes from the National Science Foundation's Division of Undergraduate Education. For the past three years, a pilot version of this project was funded by the Fund for the Improvement of Postsecondary Education (FIPSE) of the U.S. Department of Education.


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