Do politicians beat the market?
The The Wall Street Journal has been reporting on the conflict of interest concerns about politicians trading on advanced knowledge of material insider information (article link below).

I did my own analysis of Nancy Pelosi’s data and found that:

  1. Her performance beat the S&P benchmark by 4%: not too shabby, most professionals can’t do that consistently

  1. Proprietary Disposition Effect (‘selling winners too soon, losers too late’) analysis suggests active management errors reducing her performance (“negative behavioral alpha”); performance delta is rather small relative to others I’ve analyzed

  1. Larger drawdown than S&P: makes sense given portfolio holdings



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Joey Hirendernath's avatar
A really interesting article Amos thanks for sharing. Regulation is the common factor that has an influence all sectors so I am not surprised to see individuals who have a certain level or insider/privileged information gain from this foresight.
Amos Nadler, PhD's avatar
@joeyhirendernath After years of getting front-running information, I imagine politicians have developed a sense of the value of the information and take measured bets to profit from them.
There is discussion about regulating it (WSJ is reporting on it regularly), but I would give it a less than 50% chance of passing given that the people voting on it also benefit directly from it ;)
Nathan Worden's avatar
Wow this is super interesting— I would have thought she beat the market by more. Great analysis!
Amos Nadler, PhD's avatar
@nathanworden Check out the new post on Alan Lowenthal--he's killing it (while behavioral errors are killing him)!
Nathan Worden's avatar
@profofwallstreet 😄 of course its the behavioral errors that do people in! 🥲

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