Senators as Stock Pickers

Michael Giberson

Now normally I wouldn’t be the kind of guy that looks to politicians for economic advice (e.g. posting on price gouging), but on his blog Alan Jewell points out an article from the December 2004 Journal of Financial and Quantitative Analysis showing that as a group senators have done abnormally well at picking stocks.

The article uses data from 1993-1998, but Jewell notes that the annual deadline for filing personal financial disclosures is May 15 – i.e. yesterday – so perhaps someone will update the study using more current data. The article notes that the statistical evidence they find for positive abnormal returns seems to disappear in the last two years of their data (1997-1998). The authors found no changes in law or Congressional practices that might explain the change in returns, suggesting only that a magazine article on Congressional stock holdings may have tempered politicians enthusiasm for the stock market. It would be interesting to see whether or not Senators have returned to abnormal returns.