Working Paper: NBER ID: w26975
Authors: William Belmont; Bruce Sacerdote; Ranjan Sehgal; Ian Van Hoek
Abstract: We examine the stock trading behavior and returns of U.S. senators from 2012-March 2020. Stocks purchased by senators on average slightly underperform stocks in the same industry and size (market cap) categories by 11 basis points, 28 basis points and 17 basis points at the 1, 3, and 6-month time horizons. Stocks sold by senators underperform slightly for the first three months and then outperform slightly (a statistically insignificant 14 basis points) at the one year mark. We find no evidence that senators have industry specific stock picking ability related to their committee assignments. Neither Republican nor Democratic senators are skilled at picking stocks to buy, while stocks sold by Republican senators underperform by 50 basis points over three months. Stocks sold following the January 24th COVID-19 briefing do underperform the market by a statistically significant 9 percent while stocks purchased during this period underperform by 3 percent. Our findings contrast somewhat with recent news reports and studies of pre-STOCK Act (2012) returns, though are consistent with Eggers and Hainmueller (2013).
Keywords: No keywords provided
JEL Codes: G0; G12; G18
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| senators' stock purchases (G18) | relative stock performance (G12) |
| stocks sold by senators (G12) | relative stock performance (G12) |
| stocks sold after January 24 COVID-19 briefing (G10) | market performance (G14) |
| committee assignments (D72) | senators' stock picking ability (D72) |