Do Politicians' Stock Trades Signal Market Movements? Evidence from U.S. Congressional Trading Data

Abstract: Members of the United States Congress buy and sell stocks and options when writing laws that shape the economy. This has prompted debate over fairness and information. In this paper, I exploit transaction-level STOCK Act disclosures from 2012 to 2025 and daily market data to check whether trades by Congress members convey valuable information about asset prices. Event-study regressions indicate that negative short sales, puts, or inverse funds make between 1 to 1.5 percent more money than usual in a week after the trade. Likewise, good trades do not earn any more money. Committee assignments amplify this effect: lawmakers who oversee an industry see larger price changes when they trade, but longer reporting delays mean that the information is less valuable. These portfolios that mimic Congress members' positions generate profits while contrarian strategies do not compared with four and six factor models. A probit analysis of reactions on the market demonstrates that negative trades tend to lead to larger price shifts than positive ones. These patterns remain valid across many different event windows, return models, subsamples, and placebo tests. The results indicate political trades are a helpful if small source of information, but they also raise questions about insider knowledge and public trust.