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US senators the real inside traders

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Are U.S. senators

real 'inside traders'?

Study shows stock portfolios outperform market by 12%


© 2004 WorldNetDaily.com

WASHINGTON – While Martha Stewart is facing jail time for her role in dumping stock just before a government action would decrease its value, U.S. senators have an uncanny knack for doing this on a regular basis – with impunity from the securities laws they write.

A study of U.S. senators' personal stock portfolios has found they outperformed the market by an average of 12 percent a year in the five years to 1998.

"The results clearly support the notion that members of the Senate trade with a substantial informational advantage over ordinary investors," said Alan Ziobrowski of the Robinson College of Business at Georgia State University, who wrote the report.

His findings were based on 6,000 financial disclosure filings and are due to be published in the Journal of Financial and Quantitative Analysis.

"The results suggest senators knew when to buy their common stocks and when to sell," concluded Ziobrowski.

First-time senators did especially well, with their stocks outperforming by 20 percent a year on average. There was no difference in performance between Democrats and Republicans.

A separate study in 2000, covering 66,465 U.S. households from 1991 to 1996 showed the average household's portfolio underperformed the market by 1.44 percent a year.

Corporate insiders (defined as senior executives) usually outperform by about 5 percent.

Thus, it would seem the real insiders are elected officials who not only have access to information that could impact companies, but also the ability to shape that information.

Paralleling the Stewart case, the study shows it's all a matter of timing for the politicians.

Most stocks bought by senators showed little movement before the purchase, but after purchase they outperformed the market by 28.6 percent on average the following calendar year.

Returns on sell transactions are equally intriguing. Stocks sold by senators performed in line with the market the year following the sale. When adjusted by the size of stocks, total portfolio returns outperformed by 12 percent a year on average.

But don't try to emulate your senator's stock transactions for your own advantage. Under their own rules, they are not required to disclose their transactions until the middle of the following year. So, therefore, there's no way you can mimic what they're doing.

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