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James Surowiecki on insider trading and members

James Surowiecki on insider trading and members of Congress. From 1993-1998, “senators beat the market, on average, by twelve per cent annually”. Here’s a piece on the same study from the FT early last year.

Reader comments

Jason ColemanOct 24, 2005 at 2:57PM

Until reading the article, I was willing to give our senators the benefit of the doubt and assume that perhaps they were just well informed, you know, from all of those Senate hearings and so forth. However, according to Surowiecki, twelve percent seems to be far above average; incredibly high, actually.

I would think that at this point, Senators would really start considering their portfolio's as albatrosses rather than golden geese. Is that money really worth the added scrutiny? Of course, I don't necessarily think like a politician.

John D SchultzOct 24, 2005 at 5:14PM

Like Jason Coleman, my first thought was that the senators are more involved with the decision makers for various companies. As a result, I would expect that their investing would be better than the average investor that relies on business reports, filings and the like.

Secondly, I initially questioned the affect on the market of an executive or senator selling shares of stock. For instance, if I read that the executive of a company I hold stock in has sold a large amount of shares that is not contemporaneous with their normal sell habits, I would tend to view this as a sign of things to come and likewise sell my shares. Thus creating an environment of sellers often causing the stock price to move in a downward direction.

That being said, after reading the article and understanding that the twelve percent rate was exceedingly high, I do have to wonder if the senators actions are out of line.

Surowiecki's solution of pre-notification of selling/buying shares of stock likely would not solve the problem. However, it would likely allow 'outsiders' an 'inside' guess at what direction the particular companies shares are headed.

lewismOct 25, 2005 at 7:17AM

Being from the UK I don't know the rules that govern Senators trading currently are, but there is a good opportunity for a somenoe to start a Senator tracking fund!

This thread is closed to new comments. Thanks to everyone who responded.