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Abnormal Returns From the Common Stock Investments of Members of the U.S. House of Representatives

Published online by Cambridge University Press:  20 January 2017

Alan J. Ziobrowski ,
James W. Boyd ,
Ping Cheng  and
Brigitte J. Ziobrowski
Alan J. Ziobrowski
Affiliation:
Georgia State University
James W. Boyd
Affiliation:
Lindenwood University
Ping Cheng
Affiliation:
Florida Atlantic University
Brigitte J. Ziobrowski
Affiliation:
Augusta State University
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Abstract

A previous study suggests that U.S. Senators trade common stock with a substantial informational advantage compared to ordinary investors and even corporate insiders. We apply precisely the same methods to test for abnormal returns from the common stock investments of Members of the U.S. House of Representatives. We measure abnormal returns for more than 16,000 common stock transactions made by approximately 300 House delegates from 1985 to 2001. Consistent with the study of Senatorial trading activity, we find stocks purchased by Representatives also earn significant positive abnormal returns (albeit considerably smaller returns). A portfolio that mimics the purchases of House Members beats the market by 55 basis points per month (approximately 6% annually).

Keywords

abnormal returnsU.S. Congressevent study
Type
Research Articles
Information
Business and Politics , Volume 13 , Issue 1 , April 2011 , pp. 1 - 22
Copyright
Copyright © V.K. Aggarwal 2011 and published under exclusive license to Cambridge University Press 

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