Identification of Potential COVID-Related Insider Trading by US Representatives Based on Financial Disclosures (preprint)

ABSTRACT

Just over a year after the initial COVID-19 shutdown, the United States finds itself as one of the worst-hit nations in the world in terms of COVID infections and deaths per capita. While the cost of delayed action in addressing the pandemic can be debated, one thing that cannot be is when the US Congress learned of the seriousness of the virus. While our previous paper focused on the US Senate, this one focuses on the lower chamber of Congress, the US House of Representatives. Like their senate counterparts, representatives learned of the potential impact of COVID-19 on the US in a closed door meeting in late January, nearly a month-and-a-half before the initial shutdown. As in the previous paper, we sought to find signals of insider trading US Representatives based on this non-public information.Much like the upper chamber, the public also has access to stock transactions of US Representatives thanks to the United States House of Representatives Financial Disclosures database. Using the original source data as well as Quiver Quantitative's cleaned version, Novatero Investments ran three analyses on US Representative stock transactions. These analyses looking for signs of insider trading centered around the late-January closed-door COVID-19 briefing alterations in transactional volume, significant changes in strategy relative to the US market, and a market timing advantage relative to two baselines. Unlike the clear-cut findings from the Senate analyses, we found 15 representatives whose transaction activity and patterns range from "doubtful" to "strong likelihood" of insider trading, reflective of the myriad of results we've obtained from this data. While there are strong suggestions of insider trading within these results, the data provided can only go so far in terms of solid evidence, and we hope to see a deeper analysis and investigation by those who have access to a more-complete picture of these transactions.