Did Congress trade ahead? Considering the reaction of US industries to COVID-19

John W. Goodell and Toan Huynh ()

Finance Research Letters, 2020, vol. 36, issue C

Abstract: During the ongoing COVID-19 pandemic in the US, there has been considerable media attention regarding several US legislators who traded stocks in late January through February 2020. The concern is that these legislators traded in anticipation of COVID-19 having a major impact on the financial markets, while publicly suggesting otherwise. We consider whether these legislator trades were in a time window, and of a nature, that would be consistent with trading ahead of the market. Towards this end, we assess the reactions of US industries to sudden COVID-related news announcements, concomitantly with an analysis of levels of investor attention to COVID. Results suggest that, at an industry-level, for legislator trading to be “ahead of the market” it needed to have been done prior to February 26, and involving the 15 industries we identify as having abnormal returns, especially medical and pharmaceutical products (positive); restaurants, hotels, and motels (negative); as well as services and utilities. These criteria are met by many of the legislator trades. Our results help to both parameterize concerns about this case of legislator trading; as well as provide insight into the reactions and expectations of investors toward COVID-19.

Keywords: COVID-19; US industries, Investor attention; Market reaction; Insider trading; Politics and trading (search for similar items in EconPapers)
JEL-codes: F15 F23 F36 G01 G02 G14 G15 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (104)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:36:y:2020:i:c:s1544612320305018

DOI: 10.1016/j.frl.2020.101578

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