Insiders, Trading

Congressional stock performance

Members of the House of Representatives maintain stock portfolios that regularly outperform the market by about 6 percent annually, according to a study published last spring in the journal Business and Politics. The researchers, led by Alan J. Ziobrowski, an associate professor of real estate at Georgia State University, found that Democratic portfolios outperformed the market by 9 percent and Republican portfolios by 2 percent. A similar Ziobrowski study, published in 2004, found even higher returns for U.S. senators, whose portfolios outperformed the market by an average of 10 percent annually.

The new study accompanied the March reintroduction of the Stop Trading on Congressional Knowledge (STOCK) Act, which would prevent legislators and their staffers from using nonpublic information relating to Congress while trading stocks and other securities.

But transparency is not the only consideration. Ziobrowski’s study suggests that for many members of Congress, certain stocks may represent an investment in their districts or signal shared interests with constituents and therefore lead to better representation. And the George Mason law professor J.W. Verrett warned in testimony to Congress two years ago that the bill could penalize knowledgeable investors, arguing that “informed trades actually enhance the efficiency of capital markets.”

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