Senators and Stocks

Taking a break from the good news in PA, let's take another look at the bigger picture. Here's an astounding paragraph from the Oct. 31 issue of the New Yorker (p. 34):

Last year, Alan Ziobrowski, a professor at Georgia State, headed the first-ever systematic study of politicans as investors. Ziobrowski and his colleagues looked at six thousand stock transactions made by senators between 1993 and 1998. Over that time, senators beat the market, on average, by twelve percent annually. Since a mutual-fund manager who beats the market by two or three percent a year is considered a genius, the politicians' ability to forese the future seems practically divine. They did an especially good job of picking up stocks at just the right time; their buys were typically flat before they bought them, but beat the market by thirty percent on average, in the year after. By those standards [Bill] Frist looks like a bit of a piker.

The full article is not available freely on the web but here is the citation for those who would want to track it down:

Alan J. Ziobrowski, Ping Cheng, James W. Boyd, and Brigitte J. Ziobrowski. " Abnormal Returns from the Common Stock Investments of the U.S. Senate," Journal of Financial and Quantitative Analysis Vol. 39, No. 4, December 2004.

Ziobrowski lead an earlier study on the real estate dealings of senators. I was afraid to look at it.