Journal of Financial and Quantitative Analysis

Research Article

Abnormal Returns from the Common Stock Investments of the U.S. Senate

Alan J. Ziobrowskia1, Ping Chenga2, James W. Boyda3 and Brigitte J. Ziobrowskia4

a1, 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, Florida Atlantic University, Department of Industry Study, College of Business, 777 Glades Road, Boca Raton, FL 33431

a3, Kent State University, Department of Finance, College of Business Administration, Kent, OH 44242

a4, 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.