Change in Capitol: How a 60 Minutes Exposé and the STOCK Act Affected the Investment Activity of U.S. Senators

A hedged portfolio mimicking the buys and sells of U.S. Senators earns an 8.8% annualized abnormal return before 60 Minutes exposed arguably unethical trading activity by Senators. “Insiders” presented anecdotal evidence that Senators were using non-public information to time trades and prompted the passage of the Stop Trading on Congressional Knowledge (STOCK) Act. We find Senators’ pre-60 Minutes sells were particularly well-timed, occurring four to six weeks before drops in securities’ prices, so Senators avoid 16.77% in annualized abnormal portfolio losses. We find little evidence of outperformance after “Insiders” – returns to the Senator sell portfolios are 24% lower post-60 Minutes.