Congressional Insider Trading: Smoke or Fire?

Congressional Insider Trading: Smoke or Fire?

Matt Mesher
Matt Mesher
February 9, 2022

We all remember it. On a crazy day in March 2020, Tom Hanks got Covid, the NBA suspended its season, and stock markets plummeted 13%.

But not for Congress. Weeks earlier, armed with closed-door information, Senators and Representatives sold stock and avoided the steep losses that hit the rest of the American public.

Uproar ensued. Representatives have since explained that the timings were coincidental. That they were not trading on private information. And that they did nothing wrong. Yet suspicions of Congressional insider trading have continued to swirl. And not just for this incident.

Accusations of Congressional insider trading certainly sound bad. But is it smoke or fire? Being diligent analysts, we want to find out.

To start, we asked ourselves the question – What exactly would Congressional insider trading look like in the data? To help answer this, we’ve collected Congressional trade history data, stock performance data and general information about members of Congress.

Step two, we’ll want to examine Congressional behavior and stock outcomes across several dimensions. Here are a few important questions we want to ask:

  • How do Congress’ stock holdings perform relative to the market at large?
  • Who tends to outperform the market?
  • Who tends to underperform the market?
  • Who makes trades right before big stock shifts?
  • Who's family members make suspicious trades?
  • Does committee assignment influence stock trades and returns?

These are just some of the important questions to answer, and we’re excited to get to the bottom of it.

What would you look for? Are there other interesting data points to include? Let us know your thoughts, and stay tuned for our findings!

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