The Curious Superior Stock Performance of U.S. Senators

[Old Ducker]

Stephen Bainbridge, the William D Warren Professor at UCLA School of Law, is shopping an article to the Top 50 Law reviews that is about:

A 2004 study of the results of stock trading by United States Senators during the 1990s that found that Senators on average beat the market by 12% a year. In sharp contrast, U.S. households on average underperformed the market by 1.4% a year and even corporate insiders on average beat the market by only about 6% a year during that period. A reasonable inference is that some Senators had access to – and were using – material nonpublic information about the companies in whose stock they trade.
Even more outrageous, Bainbridge tells us that Senators are exempt from insider trading laws, based on the type of insider trading they are doing:

Under current law, it is unlikely that Members of Congress can be held liable for insider trading. The proposed Stop Trading on Congressional Knowledge Act addresses that problem by instructing the Securities and Exchange Commission to adopt rules intended to prohibit such trading.

(Via Keith Kelly)

http://www.economicpolicyjournal.com/2010/08/curious-superior-stock-performance-of.html

[MRK]

I don't know if it's necessarily all "inside information" that keeps them ahead, but because the senators participate first-hand in all the bills being passed and represent large corporate interests in the first place, they already know what bills are helping which companies and industries, and which companies and industries are being hurt. And with that intimate knowledge, they're able to make their stock choices more appropriately.

[FunkBuddha]

It could also be that Senators are intellectually superior to everyone else. That's why they're senators, right?

Hopefully no one took that seriously.