Preamble: The ability of Congress Members to trade stocks has been controversial from the start. There have been multiple stories covering the 2020 congressional insider trading scandal where Congress Members allegedly used insider knowledge to trade large positions in stocks just before the coronavirus pandemic crash. But none of the articles talked about the financial implications of those trades and whether the retail investors could have front-run the market using the disclosed data. Basically, what I wanted to know was
How much did the Senators save by offloading their positions before the crash and could I have done the same?
Where is the data from: efdsearch.senate.gov
For my previous analysis into congressional trading, I used data from senatestockwatcher.com. But not all the transactions are captured on the website and I wanted to match exactly with the trades reported by famous journals. efdsearch.senate.gov is the United States official website where Senator, former Senator, and candidate financial disclosure reports are available. Some of the data is available as a scanned file and some in normal HTML format. I had to manually transcribe most of the data used in this analysis.
In case you are wondering about the time delay between the actual transaction and reporting, Congress Members are expected to report the transaction within 30 days. The median delay in reporting that I observed for all the trades was 28 days.
All the trades and my analysis are shared as a google sheet at the end.
Analysis:
There are multiple factors at play here.
Timeline: On January 24, 2020, the Senate Committees on Health and Foreign Relations held a closed meeting with only Senators present to brief them about the COVID-19 outbreak and how it would affect the United States. I am considering this as the start time for my analysis. Any sale made by the senators after this point up to Feb 26 is considered. (I did not consider sales beyond that point as SPY dropped 8% during that week. My assumption here is it’s realistic for any person be it a normal investor or a Senator to panic sell after seeing that drop). For reference, SPY dropped an additional 25% over the next 3 weeks!
Senators under consideration: I have considered trades done by 4 senators in my analysis. I have focused on these 4 as all of them were investigated by Justice Department and the FBI following the trading scandal.
- Richard Burr
- Kelly Loeffler
- James M Inhofe
- David A Perdue
https://preview.redd.it/owzxgiv17g371.png?width=751&format=png&auto=webp&s=fbb5ec251a813bfcaf6d954b3992263b167ebdbd
David Perdue sold 44 times ($3.49 MM) in the 33 days following the closed senate meeting. Interestingly James Inhofe only transacted 8 times but the combined value of shares he sold was a whopping $4.12MM. The most ironic part is that Richard Burr who was under investigation the longest and had to step down from the intelligence committee due to the scandal had the least dollar volume in the transaction ($1.1MM).
Results:
Before we dive into the overall amount saved by the Senators and the retail investor side of the analysis, let’s see what were the best trades made by the Senators during that time period.
https://preview.redd.it/zzkp2rh37g371.png?width=1038&format=png&auto=webp&s=02669d67934a2bc1e4b0dc54f5a4ff97860c8b0e
David Perdue absolutely killed it with his stock plays. He is present 7 times in the top 10 list and his best play, Caesars Entertainment reduced 83% after he sold his position. Fun Fact: if a stock reduces 83%, it has to go up 488% just to r