Profiting from Real Estate: So Easy a Congressman can do it

42 Pages Posted: 8 Apr 2021

See all articles by Markus Baldauf

Markus Baldauf

University of British Columbia (UBC) - Division of Finance

Jack Y Favilukis

University of British Columbia (UBC) - Division of Finance

Lorenzo Garlappi

University of British Columbia (UBC) - Sauder School of Business

Keling Zheng

University of British Columbia (UBC) - Division of Finance

Date Written: March 10, 2021

Abstract

We use financial disclosures to construct the returns on real estate transactions by U.S. Congress members. Active Congress members outperform non-Congress members by 3.25% per year. They outperform financial professionals, doctors, and former Congress members by similar amounts. About 1/3 of the total outperformance is due to national-level market timing. Consistent with this, a Buy-Sell index of transactions of active Congress members forecasts the returns on the aggregate U.S. housing index, but a similar index of transactions of inactive Congress members does not. Another 1/2 of the total outperformance is due to city- or neighborhood-level timing, with the remainder being either hyper-local or specific to the actual house purchased. In regards to the latter, an analysis of transactions prior to, or subsequent to the Congress member's fails to find broad based evidence of bribery.

JEL Classification: E43, G21, J11

Suggested Citation

Baldauf, Markus and Favilukis, Jack Y and Garlappi, Lorenzo and Zheng, Keling, Profiting from Real Estate: So Easy a Congressman can do it (March 10, 2021). Available at SSRN: https://ssrn.com/abstract=3801378 or http://dx.doi.org/10.2139/ssrn.3801378

Markus Baldauf

University of British Columbia (UBC) - Division of Finance ( email )

2053 Main Mall
Vancouver, BC V6T 1Z2
Canada

Jack Y Favilukis (Contact Author)

University of British Columbia (UBC) - Division of Finance ( email )

2053 Main Mall
Vancouver, BC V6T 1Z2
Canada

Lorenzo Garlappi

University of British Columbia (UBC) - Sauder School of Business ( email )

2053 Main Mall
Vancouver, BC V6T 1Z2
Canada

Keling Zheng

University of British Columbia (UBC) - Division of Finance ( email )

2053 Main Mall
Vancouver, BC V6T 1Z2
Canada

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