Blogs > Liberty and Power > Senatorial Stocks

Feb 25, 2004 8:00 am

Senatorial Stocks

Just a quick thought to add to William's post about senatorial stock portfolios: Yes, some of that might be explained by senators trading on superior information, but consider a different argument. It could also be that if Senator X buys a particular stock, and if her purchase of said stock becomes known, investors assume that the industry in question, if not the particular firm, might be the benefit of favorable legislation, thus leading to a speculative politically-based run up. So what we see is not superior information causing a run-up in price, but senatorial purchases being signals about the possibility of legislatively-generated profits.

I think both explanations are in play, and that neither one is very comforting. The United States: Crony capitalism here, and abroad.

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