Senators pick the right stocks

[CBL4]

Last year, Alan Ziobrowski, a professor at Georgia State, headed the first-ever systematic study of politicians as investors. Ziobrowski and his colleagues looked at six thousand stock transactions made by senators between 1993 and 1998. Over that time, senators beat the market, on average, by twelve per cent annually. Since a mutual-fund manager who beats the market by two or three per cent a year is considered a genius, the politicians’ ability to foresee the future seems practically divine. They did an especially good job of picking up stocks at just the right time; their buys were typically flat before they bought them, but beat the market by thirty per cent, on average, in the year after. By those standards, Frist actually looks like a bit of a piker.

Are senators really that smart? The authors of the study suggest a more likely explanation: at least some senators must have been trading “based on information that is unavailable to the public”—in other words, they were engaged in some form of insider trading. It’s impossible to pin down exactly how it happened, but it’s easy to imagine senators getting occasional stock tips from corporate supplicants, and their own work in Congress often deals with confidential matters that have a direct impact on particular companies.

http://www.newyorker.com/talk/content/articles/051031ta_talk_surowiecki

 

[Manny]

Do you have a link to the actual study? I'd be curious to see it.

 

[Mycroft]

Do you have a link to the actual study? I'd be curious to see it.

I want to know if this can be used as an investment strategy. Is there a way to track these purchases real-time and copy them?

 

[CBL4]

I would not have guessed this part:

Although, the research looked at both Democrat and Republican senators, the study did not find any significant data to suggest one party had greater returns. But the researchers found seniority to play an important role.

Meanwhile, the research showed senators with least seniority, those who are serving in their first term, had greater returns than senators who had served more than two terms.

“We don’t know why,” stated Dr. Ziobrowski. He suggested maybe “The new guys may have more need for funds…than the old guys who’ve been there for twenty years.”

http://www.gsusignal.com/vnews/display.v/ART/2004/03/30/4069a3f823b09

 

[Manny]

OK. With that, I found the abstract, here. But not the whole article, at least yet.

I remember that Alfonse D'Amato was revealed at one point to have had unusually good access to shares of hot IPOs. If I were to hypothesize, I'd muse that much of the difference would be based on other Senators having similar access, particularly given the time period studied (1993-98).

 

[Luke T.]

I thought elected officials were required to put their investments into blind trusts.

The idea that not only might they have insider information, but actually make policy decisions based on their personal investments is very disconcerting.

 

[President Bush]

Perhaps we want to keep the insider’s advantage intact because we all want to be inside.

http://www.newyorker.com/talk/content/articles/051031ta_talk_surowiecki

People are mislead into believing that the share market will continue to rise in the long term. However the bubble must burst and share prices will not recover when, according to the Bible, catastrophic events will destroy the earth's wealth.

 

[peptoabysmal]

There's a reason why this land was called "the American experiment."


http://www.evote.com/index.asp?Page=/wiwo_section/2003-04/04042003WIWO.asp
http://www.enquirer.com/editions/2004/07/28/loc_cvn1atxt.html