Did Congress trade ahead? Considering the reaction of US industries to COVID-19

19 Pages Posted: 26 May 2020

See all articles by John W. Goodell

John W. Goodell

University of Akron - Department of Finance, College of Business Administration

Toan Luu Duc Huynh

Ho Chi Minh City University of Economics and Finance; WHU - Otto Beisheim School of Management

Date Written: May 23, 2020

Abstract

During the ongoing COVID-19 pandemic in the US, there has been considerable media attention regarding several US legislators who traded stocks in late January through February 2020. The concern is that these legislators traded in anticipation of COVID-19 having a major impact on the financial markets, while publicly suggesting otherwise. We consider whether these legislator trades were in a time window and of a nature that would be consistent with trading ahead of the market. Towards this end, we assess the reactions of US industries to sudden COVID-related news announcements, concomitantly with an analysis of levels of investor attention to COVID. Results suggest that, at an industry-level, for legislator trading to be “ahead of the market” it needed to have been done prior to February 26, and involving the 15 industries we identify as having abnormal returns, especially medical and pharmaceutical products (positive); restaurants, hotels, and motels (negative); as well as services and utilities. These criteria are met by many of the legislator trades. Our results help to both parameterize concerns about this case of legislator trading; as well as provide insight into the reactions and expectations of investors toward COVID-19.

Keywords: COVID-19; US industries, Investor attention; Market reaction; Insider trading; Politics and trading

JEL Classification: F15; F23; F36; G01; G02; G14; G15

Suggested Citation

Goodell, John W. and Huynh, Toan Luu Duc, Did Congress trade ahead? Considering the reaction of US industries to COVID-19 (May 23, 2020). Finance Research Letters, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3608543

John W. Goodell

University of Akron - Department of Finance, College of Business Administration ( email )

259 S. Broadway
Akron, OH 44325
United States

Toan Luu Duc Huynh (Contact Author)

Ho Chi Minh City University of Economics and Finance ( email )

59C Nguyen Dình Chieu
6th Ward, District 3
Ho Chi Minh City, Ho Chi Minh 70000
Vietnam

WHU - Otto Beisheim School of Management ( email )

Burgplatz 2
Vallendar, 56179
Germany

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
31
Abstract Views
151
PlumX Metrics