Congressional leaders are magnificent investors

A recent survey in the US showed that seven out of ten people think there should be more restrictions on members of Congress’s ability to trade stocks.

No s**t! I am still getting angry every time I remind myself that a politician can sit on a Congressional oversight committee for, say, the pharmaceutical industry, yet at the same time legally buy and sell stocks in the companies they are regulating. All they have to do is report transactions above $1,000 within 30 days. Though if they fail to do so, the consequence is a $200 fine.

This is legalised insider trading if there ever was some.

Yet, studies analysing the stock trades of members of Congress typically find that they tend to underperform the market with their trades. A new study by Shang-Jin Wei and Yifan Zhou claims, however, that there is significant outperformance for a small subset of members of Congress: the leaders of the two parties.

For the period from 1995 to 2021, the study analysed all reported stock trades by all members of Congress. Then they compared the performance of the top five party leaders from the Republicans and the Democrats with the rest of the caucus. The party leaders are the Speaker of the House and the Speaker of the minority party in the House, the party leaders, and the whips of the two parties in the House. Additionally, the leaders of the parties in the Senate and the party whips in the Senate are added to make it five people from each party.

The chart below shows the remarkable performance difference between party leaders and the rest of Congress over time.

Buy and hold abnormal return in Congress between 2019 and 2021

Source: Wei and Zhou (2025)

But here comes the kicker. The above chart only covers the pandemic period from 2019 to 2021. The chart below widens the time period under investigation to 1995 and looks at all the people who at some point in their career became a congressional leader.

The chart does not show the difference between leaders and non-leaders, but the performance for the same people before they become leaders and after. Miraculously, once a politician becomes a party leader, the performance of their stock trades improves materially.

Buy and hold abnormal return of party leaders 1995 to 2021

Source: Wei and Zhou (2025)

Of course, the authors of the paper point out that their results may be circumstantial and by no means evidence of insider trading. And I took legal advice before writing this post, and on the behest of my lawyers, I would like to state that I agree with these qualifications.