Tuesday, May 24, 2011

Congressmen Have the Buffet Touch

A new study out notes that:

Four university researchers examined 16,000 common stock transactions made by approximately 300 House representatives from 1985 to 2001, and found what they call "significant positive abnormal returns," with portfolios based on congressional trades beating the market by about 6 percent annually.
...
A study of senators by the same team of researchers five years ago found members of the higher chamber even better at beating the market -- outperforming it by about 10 percent, an amount the academics said was "both economically large and statistically significant."

I suppose they are good at stock investing for the same reason Hillary Clinton was a savvy commodities trader, and Obama was good at playing poker with Illinois lobbyists.

If the guys who set my property taxes want to bet on something, anything, I'm willing to post great odds. Just be sure to remember me, you know, later.

Update: Toronto PhD student Feng Chi has recently published an independent analysis with a similar results, see here.

3 comments:

James Oswald said...

Of course, because Congress is exempt from insider trading laws. They can short a firm, slap a huge tax on it and walk away with millions as the share price collapses.

Anonymous #5 said...

Of course, because Congress is exempt from insider trading laws. They can short a firm, slap a huge tax on it and walk away with millions as the share price collapses.

This is actually extremely unlikely to be the explanation for their outsized returns, but yeah, "of course."

Anonymous said...

http://online.wsj.com/article/SB10001424052748703431604575522434188603198.html

Congressional Staffers Gain From Trading in Stocks