5 ms·

Does a "Congress tracker fund" make money? What with all the rumoured insider trading ...

by rwmj 3y ago

jjoonathan 3y ago
NANC and KRUZ are the ticker symbols (I wish I was joking)
- smallerfish 3y ago
  Interesting that NANC is doing so much better than KRUZ. Any ideas why?
  - nordsieck 3y ago
    > Interesting that NANC is doing so much better than KRUZ. Any ideas why? Presumably because they're on different committees. Or have different friends. Just like existing law, pending legislation is too vast for any one person to know it all.
  - ckardat123 3y ago
    Nancy Pelosi holds a ton of Microsoft stock, I believe up to $25M last time I checked. I haven't checked the NANC holdings, but her Microsoft position has definitely been carrying our Nancy Pelosi Strategy on Quiver.
ckardat123 3y ago
Pretty small out-of-sample window, but we built a trading strategy on top of congressional trading data and it's done well since we launched it last year. You can see the backtest performance here, but the holdings and advanced metrics are behind a paywall (apologies in advance): https://www.quiverquant.com/strategies/ https://www.quiverquant.com/strategies/ As others have pointed out, there is a delay between when the trades are made and when they are disclosed and our strategy is able to act on them. However, this is somewhat countered by the fact that politicians tend to hold stocks for long periods of time. There are definitely some examples of politicians trading a stock right before a massive market moving event, but I think they are generally looking at a longer time horizon when they are investing.
aketchum 3y ago
I think there is a delay on stock disclosures, like they only have to disclose purchase/sale once a quarter or something which makes it hard to profitably copy their trading.
- thrtythreeforty 3y ago
  But it could be backtested, which I think is the point - "is the supposed insider trading actually profitable for Congress members?"
  - philipov 3y ago
    I think I recall someone doing that analysis and posting about it on HN, but I don't remember what the conclusion was.
    - RajT88 3y ago
      There's been articles which did the math before. Several - really every few years someone takes another pass at it. They do well. Generally, retiring their tenure wealthier than their congressional salary would allow at a 100% savings rate.
      - formerly_proven 3y ago
        > Second, we conduct the first analysis of members’ portfolio holdings, showing that between 2004 and 2008 the average member of Congress would have earned higher returns in a passive index fund. https://www.jstor.org/stable/10.1017/s0022381613000194 https://www.jstor.org/stable/10.1017/s0022381613000194 > For all trades reported electronically and on paper, the buys and sells have the same pattern; they underperform slightly for the first few months and then outperform the market after 150 days by less than 1 percent, which is not statistically significant. Otherwise, the returns of the buys and sells appear to be relatively random. > The results show that neither Democrat nor Republican senators are especially skilled at picking stocks to buy. https://home.dartmouth.edu/news/2020/04/us-senators-stock-picks-do-not-appear-reflect-inside-traders-edge https://home.dartmouth.edu/news/2020/04/us-senators-stock-pi...
carabiner 3y ago
AOC claimed the insider trading is an open secret in Congress because: * Congress members don't get paid much and like money. * They are often old with healthcare issues. Their govt health plans are not great. * They maintain two residences, one in DC and one in their home state. AOC rents an apartment in NYC that she never lives in and one in DC. This is a huge expense. Closing this privilege might have other unintended effects... Only the very wealthy can afford to be in Congress.
- pc86 3y ago
  "We should allow members of Congress to trade stocks using insider information so that poor people can afford to run for Congress" (which costs a million bucks, give or take) is certainly an interesting take.
- ericmcer 3y ago
  They are complaining because they have to live where they work? What a hardship that no one else faces…
- jakelazaroff 3y ago
  These are different problems, right? > Congress members don't get paid much and like money. They're paid $174,000 per year. [1] That's 3–4x the median US salary. I know it's not, like, lucrative, but if they wanted a lucrative salary they should have gotten a different job! > They are often old with healthcare issues. Their govt health plans are not great. Fix the government health plan. Or better yet, make it a public health plan available to everyone! > They maintain two residences, one in DC and one in their home state. AOC rents an apartment in NYC that she never lives in and one in DC. This is a huge expense. There are only 541 of these people (plus aides, etc). The government should have an official building for sitting Congresspeople to live in. Like a dorm, but for electeds! [1] https://en.wikipedia.org/wiki/Salaries_of_members_of_the_United_States_Congress https://en.wikipedia.org/wiki/Salaries_of_members_of_the_Uni...
  - mcpackieh 3y ago
    > They're paid $174,000 per year. [1] That's 3–4x the median US salary. I know it's not, like, lucrative, but if they wanted a lucrative salary they should have gotten a different job! They could also vote themselves a higher salary, but I guess they realize that would be very unpopular with the general public who, for the most part, get paid far less than politicians. The complaint essentially boils down to spoiled brats whining about wanting to be part of the economic elite. For most of the public, this complaint falls on deaf ears, particularly when it's coming from people who already have a great deal of power and are insulated from the realities of life experienced by most of the people they're ostensibly meant to be representing. "Boo hoo, I already earn 3-4x more than most people in my state and belong to an elite class of policy makers but I'm so impoverished and oppressed because the billionaires have bigger houses than me :(" Honestly more insufferable than Marie Antoinette.
andrewmutz 3y ago
We should not expect it to beat the market, since legislators themselves don't beat the market: https://www.sciencedirect.com/science/article/abs/pii/S0047272722000044 https://www.sciencedirect.com/science/article/abs/pii/S00472... > We find no evidence of superior investment performance whether we look in aggregate or at Senators specifically accused of informed trading. Over a six-month horizon, stocks bought by House Members underperform on average by 26 basis points, while stocks sold underperform by 11 basis points.

Does a "Congress tracker fund" make money? What with all the rumoured insider trading ...

by rwmj 3y ago

Does a "Congress tracker fund" make money? What with all the rumoured insider trading ...

jjoonathan 3y ago

NANC and KRUZ are the ticker symbols (I wish I was joking)

smallerfish 3y ago
Interesting that NANC is doing so much better than KRUZ. Any ideas why?
- nordsieck 3y ago
  > Interesting that NANC is doing so much better than KRUZ. Any ideas why? Presumably because they're on different committees. Or have different friends. Just like existing law, pending legislation is too vast for any one person to know it all.
- ckardat123 3y ago
  Nancy Pelosi holds a ton of Microsoft stock, I believe up to $25M last time I checked. I haven't checked the NANC holdings, but her Microsoft position has definitely been carrying our Nancy Pelosi Strategy on Quiver.

ckardat123 3y ago

Pretty small out-of-sample window, but we built a trading strategy on top of congressional trading data and it's done well since we launched it last year. You can see the backtest performance here, but the holdings and advanced metrics are behind a paywall (apologies in advance): https://www.quiverquant.com/strategies/ https://www.quiverquant.com/strategies/ As others have pointed out, there is a delay between when the trades are made and when they are disclosed and our strategy is able to act on them. However, this is somewhat countered by the fact that politicians tend to hold stocks for long periods of time. There are definitely some examples of politicians trading a stock right before a massive market moving event, but I think they are generally looking at a longer time horizon when they are investing.

aketchum 3y ago

I think there is a delay on stock disclosures, like they only have to disclose purchase/sale once a quarter or something which makes it hard to profitably copy their trading.

thrtythreeforty 3y ago
But it could be backtested, which I think is the point - "is the supposed insider trading actually profitable for Congress members?"
- philipov 3y ago
  I think I recall someone doing that analysis and posting about it on HN, but I don't remember what the conclusion was.
  - RajT88 3y ago
    There's been articles which did the math before. Several - really every few years someone takes another pass at it. They do well. Generally, retiring their tenure wealthier than their congressional salary would allow at a 100% savings rate.
    - formerly_proven 3y ago
      > Second, we conduct the first analysis of members’ portfolio holdings, showing that between 2004 and 2008 the average member of Congress would have earned higher returns in a passive index fund. https://www.jstor.org/stable/10.1017/s0022381613000194 https://www.jstor.org/stable/10.1017/s0022381613000194 > For all trades reported electronically and on paper, the buys and sells have the same pattern; they underperform slightly for the first few months and then outperform the market after 150 days by less than 1 percent, which is not statistically significant. Otherwise, the returns of the buys and sells appear to be relatively random. > The results show that neither Democrat nor Republican senators are especially skilled at picking stocks to buy. https://home.dartmouth.edu/news/2020/04/us-senators-stock-picks-do-not-appear-reflect-inside-traders-edge https://home.dartmouth.edu/news/2020/04/us-senators-stock-pi...

carabiner 3y ago

AOC claimed the insider trading is an open secret in Congress because: * Congress members don't get paid much and like money. * They are often old with healthcare issues. Their govt health plans are not great. * They maintain two residences, one in DC and one in their home state. AOC rents an apartment in NYC that she never lives in and one in DC. This is a huge expense. Closing this privilege might have other unintended effects... Only the very wealthy can afford to be in Congress.

pc86 3y ago
"We should allow members of Congress to trade stocks using insider information so that poor people can afford to run for Congress" (which costs a million bucks, give or take) is certainly an interesting take.
ericmcer 3y ago
They are complaining because they have to live where they work? What a hardship that no one else faces…
jakelazaroff 3y ago
These are different problems, right? > Congress members don't get paid much and like money. They're paid $174,000 per year. [1] That's 3–4x the median US salary. I know it's not, like, lucrative, but if they wanted a lucrative salary they should have gotten a different job! > They are often old with healthcare issues. Their govt health plans are not great. Fix the government health plan. Or better yet, make it a public health plan available to everyone! > They maintain two residences, one in DC and one in their home state. AOC rents an apartment in NYC that she never lives in and one in DC. This is a huge expense. There are only 541 of these people (plus aides, etc). The government should have an official building for sitting Congresspeople to live in. Like a dorm, but for electeds! [1] https://en.wikipedia.org/wiki/Salaries_of_members_of_the_United_States_Congress https://en.wikipedia.org/wiki/Salaries_of_members_of_the_Uni...
- mcpackieh 3y ago
  > They're paid $174,000 per year. [1] That's 3–4x the median US salary. I know it's not, like, lucrative, but if they wanted a lucrative salary they should have gotten a different job! They could also vote themselves a higher salary, but I guess they realize that would be very unpopular with the general public who, for the most part, get paid far less than politicians. The complaint essentially boils down to spoiled brats whining about wanting to be part of the economic elite. For most of the public, this complaint falls on deaf ears, particularly when it's coming from people who already have a great deal of power and are insulated from the realities of life experienced by most of the people they're ostensibly meant to be representing. "Boo hoo, I already earn 3-4x more than most people in my state and belong to an elite class of policy makers but I'm so impoverished and oppressed because the billionaires have bigger houses than me :(" Honestly more insufferable than Marie Antoinette.

andrewmutz 3y ago

We should not expect it to beat the market, since legislators themselves don't beat the market: https://www.sciencedirect.com/science/article/abs/pii/S0047272722000044 https://www.sciencedirect.com/science/article/abs/pii/S00472... > We find no evidence of superior investment performance whether we look in aggregate or at Senators specifically accused of informed trading. Over a six-month horizon, stocks bought by House Members underperform on average by 26 basis points, while stocks sold underperform by 11 basis points.