Working Papers

Congressional Stock Trades and Economic Policy Uncertainty

Abstract
Do congress members trade on insider information? We answer this old question from a new perspective by investigating if there is any relation between the abnormal returns of stock trades by congress members and economic policy uncertainty. Using congressional stock trading data for 2014-2022, we find a positive relationship between economic policy uncertainty and short-term abnormal returns of congress members' stock purchases, adjusted for S&P 500, size (year-end market capitalization) or Fama-French 12-industry benchmarks. The positive association is stronger among stocks of industries that are more intertwined with policies set by Congress members. We additionally explore bills sponsorship (and committee assignment, work in progress) as a mechanism through which politicians may obtain information against uncertainty. These findings remain robust after accounting for the possibility that politicians obtain firm-specific insider information from corporate insiders. This paper is the first to show the connection between politician stock trade performance and an economic indicator that is also closely related to the information privilege politicians attain from their work in policymaking.

Presentations: SWFA 2024, FMA 2024 (Best Paper Award semi-finalist)

Work in Progress