Abnormal returns from joining Congress? Evidence from new members

Hall, Joshua C.; Karadas, Serkan; Schlosky, Minh Tam Tammy

doi:10.1108/jfep-12-2016-0095

Cited by 5 publications

(3 citation statements)

References 32 publications

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“…Our finding is consistent with research conducted bySantoso & Sri Artini (2015), who found that there were no difference between abnormal return before the 2014 legislative election and abnormal return after the event. As stated by Hall, Karadas, & Schlosky (2017), investors take no advantage on political information, or they might had reacted to the issuance of the information prior the election. Therefore, there is no more reaction during the general election.…”

Section: Resultsmentioning

confidence: 99%

Do Regional Election and Presidential Election Affect Stock Exchange? An Event Study in the Indonesian Stock Exchange

Khanifah

Triyani

Setyahuni

2021

JAB

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The 2018 simultaneous regional election in Indonesia is something new in the events of democratic politics in Indonesia. The events of the 2018 simultaneous regional election is one of the important events in 2018 that can cause a reaction of capital market to these events. This study aims to examine how the capital market reacts to the simultaneous regional elections in 2018 and presidential elections in 2019, by looking at the differences in the preceding and following periods based on 2 variables, namely abnormal return and trading volume activity. The sample in this study were 30 companies listed in the Indonesian Stock Exchange during 30 periods from February through July 2018. Research Methode This study used an event study. One paired samples T test was used as a technique analysis. The means of each variable within eleven days period was compared. The period of observation is five days before the event, five days after the event, and one day on event day. Based on the results of the parametric statistical calculations, the paired sample t-test showed that there was no difference between the level of abnormal returns before and after the 2018 simultaneous regional elections. On the other hand, there was a difference between trading volume of activity before and after the 2018 simultaneous regional elections.

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Section: Resultsmentioning

confidence: 99%

Do Regional Election and Presidential Election Affect Stock Exchange? An Event Study in the Indonesian Stock Exchange

Khanifah

Triyani

Setyahuni

2021

JAB

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“…Ziobrowski et al (2011) then find that members of the US House of Representatives outperformed the market by 55 basis points a month. Their seminal work has led to a number of papers on trading by politicians (Eggers and Hainmueller, 2014;Tahoun, 2014;Hall et al, 2017;Karadas, 2018Karadas, , 2019.…”

Section: Introductionmentioning

confidence: 99%

Aggregate congressional trading and stock market returns

Karadas

Schlosky

Hall

2021

JFEP

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Purpose What information do members of Congress (politicians) use when they trade stocks? The purpose of this paper is to attempt to answer this question by investigating the relationship between an aggregate measure of trading by members of Congress (aggregate congressional trading) and future stock market returns. Design/methodology/approach The authors follow the empirical framework used in academic work on corporate insiders. In particular, they aggregate 61,998 common stock transactions by politicians over the 2004–2010 period and estimate time series regressions at a monthly frequency with heteroskedasticity and autocorrelation robust t-statistics. Findings The authors find that aggregate congressional trading predicts future stock market returns, suggesting that politicians use economy-wide (i.e. macroeconomic) information in their stock trades. The authors also present evidence that aggregate congressional trading is related to the growth rate of industrial production, suggesting that industrial production serves as a potential channel through which aggregate congressional trading predicts future stock market returns. Originality/value To the best of the authors’ knowledge, this study is the first to document a relationship between aggregate congressional trading and stock market returns. The media and scholarly attention on politicians’ trades have mostly focused on the question of whether politicians have superior information on individual firms. The results from this study suggest that politicians’ informational advantage may go beyond individual firms such that they potentially have superior information on the overall trajectory of the economy as well.

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“…The authors re-construct the portfolios of members of Congress based on their daily stock transactions (during 1993-1998 for the Senate and1985-2001 for the House) and document that these portfolios outperform the market. Further evidence in the literature reveals that local knowledge (Eggers and Hainmueller 2014), family ties (Karadas 2018), and the congressional committee powers (Hall et al 2017;Karadas 2019) affect the portfolio performance of trades reported by politicians.…”

Section: Introductionmentioning

confidence: 99%

Did Politicians Use Non-Public Macroeconomic Information in Their Stock Trades? Evidence from the STOCK Act of 2012

Karadas

Schlosky

Hall

2021

JRFM

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Existing research shows that members of Congress made informed trades prior to the passage of the STOCK Act of 2012. There is also evidence in the literature to suggest that the STOCK Act was able to deter politicians from trading based on non-public information. However, the question of whether politicians made informed trades at the market level (using non-public macroeconomic information, not just firm-specific information) in the first place and whether they continued to do so even after the passage of the STOCK Act remains unexamined. We analyze 101,191 individual stock transactions covering the 2004–2014 period and find that the STOCK Act adversely affected the ability of politicians’ aggregated stock trades to predict the stock market returns. Our results imply that politicians used non-public macroeconomic information prior to the STOCK Act, and this legislation was influential in deterring politicians from using non-public macroeconomic information in their stock trades. Our findings also provide input on the current debate on the need for the STOCK Act 2.0.

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Abnormal returns from joining Congress? Evidence from new members

Cited by 5 publications

References 32 publications

Do Regional Election and Presidential Election Affect Stock Exchange? An Event Study in the Indonesian Stock Exchange

Do Regional Election and Presidential Election Affect Stock Exchange? An Event Study in the Indonesian Stock Exchange

Aggregate congressional trading and stock market returns

Did Politicians Use Non-Public Macroeconomic Information in Their Stock Trades? Evidence from the STOCK Act of 2012

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