Senators are really good at stock-picking

Date:March 15, 2004 / year-entry #98
Tags:non-computer
Orig Link:https://blogs.msdn.microsoft.com/oldnewthing/20040315-00/?p=40263
Comments:    6
Summary:A Georgia State University study shows that U.S. senators have an uncanny knack for picking stocks that outpace the overall market. Professor Alan Ziobrowski's analysis of senators' financial disclosure data found that over a period of six years, the lawmakers outperformed the market by 12 percent. Professor Ziobrowski seems convinced that this is evidence of...

A Georgia State University study shows that U.S. senators have an uncanny knack for picking stocks that outpace the overall market. Professor Alan Ziobrowski's analysis of senators' financial disclosure data found that over a period of six years, the lawmakers outperformed the market by 12 percent.

Professor Ziobrowski seems convinced that this is evidence of unethical behavior.

Comments (6)
  1. Jason Nadal says:
    March 15, 2004 at 10:57 am

    More likely is that they were helped into the positions they are in in part due to an understanding of how the market economy works. It would seem that there is a grey line for unethical behavior of buys/sells that is only defined based on time. IE. buying a large volume of stocks, and selling quick isn’t very ethical, but doing the same with a small volume, or over a long time may be. But there’s no standard of when exactly it crosses the line…

  2. Zirakzigil says:
    March 15, 2004 at 12:29 pm

    Also, many Senators are quite wealthy, and were quite wealthy before entering the Senate. I imagine wealthy people tend to have stocks that outperform the market. A more interesting comparison would be between Senators’ stocks and those of non-Senators of comparable wealth.

  3. Raymond Chen says:
    March 15, 2004 at 12:45 pm

    What the researchers did was watch what happened to the stock in the period surrounding the transaction, not by looking at the "hold" stocks. Seems that when a relatively stable stock is bought by a senator, it starts to rise the very next day. When a rising stock is sold by a senator, it starts to level off.

    So if you bought when senators bought and sold when senators sold, you’d be doing pretty good.

  4. Claw says:
    March 15, 2004 at 2:43 pm

    Here’s another blogger playing devil’s advocate:

    http://markschmitt.typepad.com/decembrist/2004/02/a_heavy_accusat.html

    …although the LA Times had a pretty good investigation of one senator in particular:

    http://www.latimes.com/la-na-stevens17dec17,1,2073859.story

  5. a little ludwig goes a long way says:
    March 15, 2004 at 4:28 pm

    Senators are really good at stock-picking — nice find from Raymond Chen. As the comments point out, the causality here is not totally clear. Though a strong suggestion that Senators benefit from their position. Now I thought that Presidents put…

  6. visitor says:
    April 25, 2004 at 5:03 pm

    i’m guessing the biggest advantage senators have in stock picking is their understanding of new legislation and how it will affect companies. For instance, with a new healthcare bill, senators will have a very good idea what companies it will help and which it will hurt. the thing is it’s not secret info, theyre just among the few that have to bother to read through it all.

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