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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: 1353
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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#3. To: Anthem (#0)
They use such broad amounts to track the net worth of individual members, it is very hard to establish evidence of the insider trading this writer is suspecting. Unless they are forced to disclose more accurate figures on their net worth, there is no way to quantify how much insider trading is occurring. Of course, that is why they have such broad ranges of income reporting. And it is Congress who decides how broad to make the ranges of those disclosures. As usual, the fox is guarding the henhouse.
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