When portfolios speak: Identity signaling in congressional trading

We investigate whether legislators use equity trading as a form of political expression. Using comprehensive congressional transaction data, we document a robust gender-based asymmetry: male legislators allocate significantly more capital to firms with greater female board representation, whereas female legislators exhibit no comparable pattern. Exploiting California Senate Bill 826 and geographic variation in the local supply of female directors as sources of exogenous variation in board gender composition, we identify a causal effect on legislators’ investment activity. The evidence supports a signaling mechanism: male legislators—especially Democrats, those facing imminent elections, and those representing female-majority constituencies—use observable portfolio choices to signal support for gender diversity, rather than trading on superior firm performance or lower risk associated with gender-diverse boards. Overall, our findings suggest that for U.S. legislators, the stock market functions not only as a venue for wealth accumulation but also as a stage for identity signaling.