Study Shows Congressional Leaders Outperform Peers by 47 Points a Year
December may carry a reputation for “Santa Claus rallies,” but recent years have proven that the final month isn’t always kind to stocks. With December starting on a shaky note, fresh academic research is adding another twist to the market narrative—this time focusing on Congress.
A new study circulated by the National Bureau of Economic Research finds that the real stock-picking standouts on Capitol Hill aren’t rank-and-file members, but the most powerful lawmakers: party leaders, whips, and caucus chairs.
According to researchers Shang-Jin Wei of Columbia University and Yifan Zhou of Xi’an Jiaotong-Liverpool University, lawmakers who eventually rise to leadership positions trade no differently from their peers before they assume power. But after reaching leadership roles, they outperform those peers by a staggering 47 percentage points annually.
Why the dramatic edge? Leaders gain more insight and influence—direct visibility into the legislative calendar, regulatory shifts, and federal spending priorities. They also enjoy greater access to corporate executives. The study finds that post-ascension, leaders earn significantly higher abnormal returns when trading stocks of companies headquartered in their home states or contributing to their campaigns—relationships that may offer privileged firm-level information.
The researchers also note that leadership stock buys tend to precede positive corporate developments within a year, such as dividend increases—events executives would typically know in advance. Their trades did not predict news executives wouldn’t be privy to, like legal issues.
Of course, the findings come with caveats. Congressional trade disclosures only show ranges, not exact amounts, and the sample size is tiny: just 47 leaders between 1995 and 2021, with only 20 trading both before and after taking leadership roles. The study is also a working paper awaiting peer review.
Some may wonder whether the results are skewed by high-profile figures like Nancy Pelosi, whose husband is a venture capitalist. While the study doesn’t isolate Pelosi’s trades, it does exclude top traders in several tests—and still finds that leaders dramatically outperform the rest of Congress, with the gap widening in some cases.
Even the 2012 STOCK Act—which aimed to curb potential insider advantages—did little to change the pattern. Trading frequency fell across Congress, but leaders’ average trade sizes and abnormal returns remained essentially unaffected.
