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Title: Abnormal Returns from Joining Congress? Evidence from New Members
Source:
Ideas
URL Source: https://ideas.repec.org/p/wvu/wpaper/16-25.html
Published: Jul 11, 2017
Author: multiple
Post Date: 2017-07-11 11:55:28 by Anthem
Keywords: None
Views: 736
Comments: 3
Abstract Past research shows that members of Congress are informed traders, i.e., that they earn abnormal returns while in office. This important research does not identify whether being elected leads to informed trading or whether informed traders are selected into office. We try to provide a partial answer to this question by looking at whether new members of Congress were informed traders prior to being elected and how their portfolio performance changes after election and appointment to different types of committees. Due to data limitations our analysis focus on the pre-congressional (i.e., election) and congressional (i.e., post-election) common stock trades made by newly elected members of Congress from 2004-2010. We find weak evidence of informed trading for the pre-Congress period, suggesting that informed traders are not being selected into office. When combined with our finding that the portfolios of members serving on powerful committees outperform the market during their second term in office, this provides additional evidence that serving on influential committees is the mechanism by which members of Congress earn abnormal returns. File URL: busecon.wvu.edu/phd_economics/pdf/16-25.pdf Poster Comment: W Well, well, th that doesn't seem right. 
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#1. To: Anthem (#0)
Immediately after becoming elected to national office, people are besieged by other people bearing good will and gifts. It's a good life.
#2. To: rlk (#1)
They're making angels: cha-ching cha-ching!
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