Capital in the Capitol: Congressional Trades Resemble Uninformed Retail Trading

Do elected officials exploit informational advantages for personal financial gain? This question has attracted heightened attention amid increased scrutiny of congressional stock trading, particularly following the COVID-19 pandemic. Prior research finds little evidence that legislators outperform the market, but existing studies rely on limited time periods and offer limited insight into the mechanisms underlying trade timing. We revisit this question by constructing a novel dataset covering the stock trading activity of all U.S. members of Congress and their immediate families from 2012 to 2023. We find that, on average, legislators’ portfolios underperform or, at best, match market benchmarks after the STOCK Act. What explains this mediocre performance? We show that legislators’ positions track financial professionals’ recommendations, and that their timing largely reflects prevailing market sentiment, estimated from retail investors’ social media posts, rather than anticipating future price changes. Together, these results suggest that legislators’ observable trading behavior is more consistent with public-signal-following than with systematically profitable use of private information.