Journal of Public Economics · 2022 · William Belmont、Bruce Sacerdote、Ranjan Sehgal、Ian Van Hoek
Abstract
Recent news reports and a Department of Justice investigation highlight the potential for insider informed trading by U.S. Senators and Members of the House of Representatives, an activity which the STOCK Act of 2012 was intended to deter. We use a new and comprehensive data set of these officials’ trades of public equities from January 2012-December 2020. We find no evidence of superior investment performance whether we look in aggregate or at Senators specifically accused of informed trading. Over a six-month horizon, stocks bought by House Members underperform on average by 26 basis points, while stocks sold underperform by 11 basis points. Even at the 95th and 99th percentiles of ex-post stock returns, House and Senator stock returns are consistent with random stock picking. Our methods cannot rule out the existence of some insider trades that are masked by the means, masked by poor ex-post performance or that took place in earlier years.