Troubling Stats On Congressional Investing

One of the sad facts of modern politics is that most (nearly all) members of Congress are wealthy individuals. It is a rare occurrence for a person with a median income or less to be elected to the House of Representatives, and even rarer for them to get elected to the Senate. And while they are tasked with making the laws that regulate investing and finance in this country, most of these wealthy people do some investing themselves.

This brings up the question -- how good are these elected members of Congress at investing? Some scholars decided to find out. They are Alan J. Ziobrowski (Georgia State University), James W. Boyd (Lindenwood University), Ping Cheng (Florida Atlantic University), and Brigitte J. Ziobrowski (Augusta State University). They examined more than 16,000 common stock transactions made by about 300 House members between 1985 and 2001, and what they found was a bit unsettling.

It turns out these elected officials have a remarkably good investment record -- much better than the average investor. They found the stocks purchased by the representatives "earn significant positive abnormal returns" -- beating the market average "by 55 basis points per month (about 6% annually)". And it wasn't just the House members. A previous survey showed the senators do even better.

The scholars don't accuse the Congress members of "insider trading", but one has to wonder how they can consistently beat the market average. Are they getting some tips from Wall Street lobbyists? Is this why they won't pass any strict (and badly needed) regulations to control the greedy manipulations of Wall Street and the giant banks?

If these officials aren't getting inside tips then they should leave their elected positions (where they generally show incompetence) and get a job on Wall Street (where they show a remarkable aptitude). I'm just not buying they are all that smart.