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Capitol Losses: The Mediocre Performance of Congressional Stock Portfolios, 2004-2008

The Journal of Politics, Vol. 75, No. 2, April 2013, pp. 535-551

35 Pages Posted: 17 Feb 2011 Last revised: 29 Jun 2013

Andrew C. Eggers

University of Oxford

Jens Hainmueller

Stanford University - Department of Political Science; Stanford Graduate School of Business; Stanford Immigration Policy Lab

Date Written: August 1, 2012

Abstract

Given the well-documented effects of public policy on financial markets, one would expect political insiders to be capable of enriching themselves through savvy investing. Consistent with this, two prior studies of stock trades in Congress conclude that members of both the House and Senate easily out-perform the market, fueling the perception that corrupt "insider trading" is widespread in Congress. In this paper, we point out serious shortcomings in existing studies on congressional investing and carry out our own analysis using financial disclosure data from the 2004-2008 period. We fi nd no evidence of either informed trading or above-market portfolio returns for Congress as a whole or any subset of members. In fact, the average investor in Congress underperformed the market by 2-3% annually during this period, suggesting that a substantial majority of members would have financially benefited from replacing their stock holdings with passive index funds. Our research suggests that widespread political "insider trading" in Congress is more myth than reality.

Keywords: corruption, Congress, legislators, insider trading, accountability, political agency

JEL Classification: G10, G11

Suggested Citation

Eggers, Andrew C. and Hainmueller, Jens, Capitol Losses: The Mediocre Performance of Congressional Stock Portfolios, 2004-2008 (August 1, 2012). The Journal of Politics, Vol. 75, No. 2, April 2013, pp. 535-551. Available at SSRN: https://ssrn.com/abstract=1762019 or http://dx.doi.org/10.2139/ssrn.1762019

Andrew C. Eggers

University of Oxford ( email )

Mansfield Road
Oxford, Oxfordshire OX1 4AU
United Kingdom

Jens Hainmueller (Contact Author)

Stanford University - Department of Political Science ( email )

Stanford, CA 94305
United States

HOME PAGE: http://www.stanford.edu/~jhain/

Stanford Graduate School of Business ( email )

655 Knight Way
Stanford, CA 94305-5015
United States

Stanford Immigration Policy Lab

30 Alta Road
Stanford, CA 94305
United States

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