Trading on the Hill: Can Investors Profit from Mimicking U.S. Congressional Stock Trades?

Abstract

This study examines whether stock purchases disclosed by U.S. House members generate positive abnormal returns following public disclosure, and whether an outside investor can earn risk-adjusted alpha by mimicking those purchases. We analyse a main sample of 5,225 events from January 2020 through December 2024 using an event study anchored on the disclosure date and a calendar-time mimicking portfolio benchmarked against the Fama–French three- and five-factor models with Newey–West standard errors. We find no support for either positive-return hypothesis. Cumulative abnormal returns are significantly negative at 20- and 40-day horizons, and calendar-time portfolio alpha is negative across all factor models and weighting schemes. After transaction costs, the equal-weighted portfolio earns a marginally significant negative alpha of –40 basis points per month under the primary three-factor specification. The results are consistent with the absence of an exploitable post-disclosure signal, as predicted by semi-strong market efficiency. A sub-sample analysis finds that the negative result is concentrated among Democratic members’ disclosed purchases, while Republican members’ purchases generate near-zero risk-adjusted returns. The findings suggest that publicly disclosed House purchases did not provide a profitable raw signal to outside investors during a period of unusually high public attention to congressional trading.