a1 email@example.com, Georgia State University, Department of Real Estate, J. Mack Robinson College of Business, P.O. Box 4020, 33 Gilmer Street SE, Atlanta, GA 30302
a2 firstname.lastname@example.org, Florida Atlantic University, Department of Industry Study, College of Business, 777 Glades Road, Boca Raton, FL 33431
a3 email@example.com, Kent State University, Department of Finance, College of Business Administration, Kent, OH 44242
a4 firstname.lastname@example.org, Augusta State University, School of Business Administration, Augusta, GA 30904
The actions of the federal government can have a profound impact on financial markets. As prominent participants in the government decision making process, U.S. Senators are likely to have knowledge of forthcoming government actions before the information becomes public. This could provide them with an informational advantage over other investors. We test for abnormal returns from the common stock investments of members of the U.S. Senate during the period 1993–1998. We document that a portfolio that mimics the purchases of U.S. Senators beats the market by 85 basis points per month, while a portfolio that mimics the sales of Senators lags the market by 12 basis points per month. The large difference in the returns of stocks bought and sold (nearly one percentage point per month) is economically large and reliably positive.