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Trading on Private Information: Evidence from Members of Congress

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  • Serkan Karadas

Abstract

I examine the stock trades of members of Congress and find that over 2004–2010 the buy‐minus‐sell portfolios of powerful Republicans have the highest abnormal returns, exceeding 35% on an annual basis under a one‐week holding period. Among powerful Republicans, the abnormal returns are mostly concentrated in the portfolios of those with less trading experience. I also find that the positive abnormal returns disappear after the Stop Trading on Congressional Knowledge (STOCK) Act was passed in 2012. My results imply that the STOCK Act affected politicians' incentives to trade on private information, which they acquired through their power and party membership.

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  • Serkan Karadas, 2019. "Trading on Private Information: Evidence from Members of Congress," The Financial Review, Eastern Finance Association, vol. 54(1), pages 85-131, February.
    • Handle: RePEc:bla:finrev:v:54:y:2019:i:1:p:85-131
    DOI: 10.1111/fire.12180
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    1. Serkan Karadas & Minh Tam Tammy Schlosky & Joshua Hall, 2021. "Did Politicians Use Non-Public Macroeconomic Information in Their Stock Trades? Evidence from the STOCK Act of 2012," JRFM, MDPI, vol. 14(6), pages 1-18, June.

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