Pending University of Virginia Report on SEC Stock Picking Allegations

Published on: March 13, 2014

Filled Under: Blog, Finance & Economics, Worth Reading and Watching

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For now I’m withholding my own specific commentary on this issue as the report mentioned here still remains preliminary, but the issue is absolutely something to keep one’s eyes on in the future.

According to a recent post at The Cadwalader Cabinet: “A report from two academic professors, released by the Darden School of Business at the University of Virginia, found that SEC employees’ hedge portfolios earn positive and economically significant abnormal returns. Shivaram Rajgopal of Emory University and Roger M. White of Georgia State University (the “researchers”) used data obtained through the Freedom of Information Act to investigate the trading strategies of the SEC’s 3,500 employees during 2009-2011. . . The researchers found that the abnormal returns came from the selling, not buying, of stocks ahead of a decline in stock prices.  They found that the returns were about 4 percent per year for all securities in general, and 8.5 percent for U.S. common stocks, noting that a hedge portfolio mimicking corporate insider trades earns returns of about 6 percent per year.”

A copy of the draft version is below and the researchers note that they’re “open to comments.”

“Stock Picking Skills of SEC Employees.”

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