Members of Congress Do 'Abnormally' Well in Stock Market
Now here's something you couldn't have imagined: Members of Congress tend to outperform the stock market with their personal investments! And you all thought they were so stupid.
A new study by a group of professors reviewed 16,000 common stock transactions made by House members between 1985 and 2001. The results showed that these approximately 300 representatives beat the market by about 6 percent annually, or 55 basis points per month — what they label "significant positive abnormal returns." The professors indicate that this might be because they're all filthy corrupt sleaze monsters — at least subconsciously — although that cannot be confirmed empirically. Via HuffPo:
In the course of performing their normal duties, members of Congress have access to non-public information that could have a substantial impact on certain businesses, industries or the economy as a whole. If used as the basis for common stock transactions, such information could yield significant personal trading profits.
It would seem hard for these members, who aren't forced to sell off their stock holdings upon taking office, to not let non-public information affect their investment decisions. It's all just sort of there, floating around in the ether of closed-door subcommittee hearings and private meetings with contractors.
Another interesting finding is that the junior members tend to outperform those with seniority. The researchers speculate that junior members who haven't established themselves are more vulnerable, and poorer, and need to take the buck while they can: "House Members with the least seniority may have fewer opportunities to trade on privileged information," they write, "but they may be the most highly motivated to do so when the opportunities arise." Little brats.
