Profiting from connections: Do politicians receive stock tips from brokerage houses?

This study investigates whether brokerage houses appear to provide stock tips to politicians. Our results indicate that trades by politicians who are politically connected to the brokerage house where the trade is executed are more profitable. Our estimates suggest that these connected trades earn an incremental 0.3% over a five-day window relative to the politician's average profitability. Given the average number of trades our sample politicians execute in a year, the 0.3% return per trade translates to an incremental $3,411 in trading profits each year. We provide additional support by investigating the frequency and differential profitability of politicians' trades immediately before the brokerage house issues a revised recommendation, as well as during a period when Goldman, Sachs & Co. was sanctioned for providing stock tips to high priority clients. Additional tests suggest that brokerages may provide stock tips to politicians in exchange for favorable legislative outcomes or political information.

© This manuscript version is made available under the CC-BY-NC-ND 4.0 license



Work Title Profiting from connections: Do politicians receive stock tips from brokerage houses?
Open Access
  1. Andrew P. Stephan
  2. Beverly R. Walther
  3. Laura A. Wellman
License CC BY-NC-ND 4.0 (Attribution-NonCommercial-NoDerivatives)
Work Type Article
  1. Elsevier BV
Publication Date August 2021
Publisher Identifier (DOI)
  1. 10.1016/j.jacceco.2021.101401
  1. Journal of Accounting and Economics
Deposited February 23, 2022




This resource is currently not in any collection.

Work History

Version 1

  • Created
  • Added JAE101401_proof_202103002018403921-1.pdf
  • Added Creator Andrew P. Stephan
  • Added Creator Beverly R. Walther
  • Added Creator Laura A. Wellman
  • Published
  • Updated
  • Updated
  • Updated