Congress's Phony Insider-Trading Reform
Originally Posted At the Wall Street Journal
By Jonathan Macey
December 13, 2011
The denizens of Capitol Hill are remarkable investors. A new law meant to curb abuses would only make their shenanigans easier.
Members of Congress already get better health insurance and retirement benefits than other Americans. They are about to get better insider trading laws as well.
Several academic studies show that the investment portfolios of congressmen and senators consistently outperform stock indices like the Dow and the S&P 500, as well as the portfolios of virtually all professional investors. Congressmen do better to an extent that is statistically significant, according to studies including a 2004 article about "abnormal" Senate returns by Alan J. Ziobrowski, Ping Cheng, James W. Boyd and Brigitte J. Ziobrowski in the Journal of Financial and Qualitative Analysis. The authors published a similar study of the House this year.
Democrats' portfolios outperform the market by a whopping 9%. Republicans do well, though not quite as well. And the trading is widespread, although a higher percentage of senators than representatives trade—which is not surprising because senators outperform the market by an astonishing 12% on an annual basis.
Read the rest of the article here. . .
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