The Edge Game

How Proximity to Information Shapes Market Advantage

May 04, 2026 • Estimated Reading Time: 11 minutes

Markets prefer a clean narrative: prices move on fundamentals, investors respond to public information, and the winners are simply those who analyze better than everyone else. But decades of insider trading investigations, congressional scrutiny, and high-profile market breakdowns point to a different reality. The decisive edge often has less to do with analytical brilliance and more to do with positioning—who is closest to the signal before it spreads. Who hears about the earnings miss before the call, the regulatory shift before the announcement, or the supply chain disruption before its consequences appear in prices.

This report looks at that structural advantage across several contexts. In public markets, speed allows informed participants to exit before a broader selloff begins. In private markets, illiquidity slows reactions and can sometimes insulate valuations. In government, proximity to policymaking can shape entire industries before changes become visible to investors. And across networks, institutions, and geographic hubs, information flows long before it becomes consensus.

The aim is not admiration, but understanding. Insider trading is illegal because markets depend on fairness and equal access to information. Yet studying these cases reveals something deeper about how advantage is actually built. The most powerful edge is often not superior intelligence, but proximity to information.

In that sense, markets are rarely about predicting the future. They are about recognizing the signal before others do.

The First Move: Selling Before the Signal

In hindsight, markets often appear chaotic. Prices collapse, narratives shift, and explanations follow. But beneath that apparent disorder lies a simple structural dynamic: the earliest moves rarely come from the broad market. They come from those closest to the information.

In many insider trading cases, the edge being pursued is straightforward. Timing, not prediction. Not genius, but access. Early knowledge of earnings revisions, regulatory decisions, failed clinical trials, or weakening demand inside a supply chain creates a clear incentive: exit before the market understands what is about to happen.

The sequence tends to unfold in a consistent way. An informed trader sells first, quietly exiting while prices still reflect outdated assumptions. The broader market sees little at that stage. Once the information becomes public, reactions accelerate. Uninformed investors begin selling, often reinforcing one another through herd behavior. By the time the cascade fully develops, much of the value has already been destroyed. The advantage lay in moving first.

What makes these cases instructive is not only their illegality, but the pattern they reveal. Again and again, traders seek proximity to information because markets reward those who interpret reality earliest. When that proximity is obtained illegally, it crosses a clear boundary. But the underlying economic impulse does not change. In markets, timing dominates analysis more often than investors like to admit.

The earliest actor preserves the greatest share of capital because prices at that moment still reflect the prior equilibrium. The market has not yet absorbed the coming information. The signal itself arrives only after the informed trade has already taken place, and that delay is the entire source of the advantage. Once the information spreads, most participants react rather than anticipate, and their collective response drives the price downward. The process is not gradual; selling pressure compounds as each new participant validates the signal for the next. By the final stage, prices have adjusted sharply, often destroying a substantial portion of value, while the informed trader has already exited.

At its core, the incentive in these cases is not extraordinary insight but information asymmetry. Many investors assume that success comes from superior forecasting, yet these patterns suggest something less comfortable: sometimes the decisive edge is simply knowing first. Markets do not process information simultaneously. It moves through networks, institutions, and disclosures in sequence, and the order of arrival determines who benefits. The legal boundary around insider trading is clear because it exploits non-public information, but the broader lesson remains. Sophisticated investors are constantly trying to position themselves closer to the sources of information that shape market outcomes.

The pattern repeats across industries and cases. Different actors, different contexts, but the same objective: move closer to the signal, act before it spreads, and protect capital before the market adjusts.

Illiquidity Changes the Game: When Information Cannot Escape

In public markets, advantage is defined by speed. Information surfaces, trades execute immediately, and prices adjust before most participants have time to process what happened. Private markets operate under a different set of constraints. Liquidity is limited, transactions are slow, and ownership is concentrated. Those features fundamentally alter how information moves—and how investors can respond.

When an investor in a private asset receives negative information early, the instinct does not change. Act quickly, protect capital, exit before others recognize the signal. The difference is that, in private markets, exit is often not an option. Ownership structures, transfer restrictions, and a limited pool of buyers make rapid selling difficult or impossible. The same illiquidity that promises higher returns in good times restricts flexibility when conditions deteriorate.

The structural consequence is significant. Even when negative information emerges, investors cannot simply rush for the exits. Instead, the signal spreads gradually across a smaller, more constrained ownership base. Some investors may find opportunities to sell over time, while others hold by necessity. Meanwhile, the underlying asset continues to operate through the cycle. Rather than triggering an immediate price collapse driven by trading activity, the impact tends to be slower and more contained, often followed by stabilization as fundamentals reassert themselves.

This dynamic creates a sharp contrast with public markets. Illiquidity dampens the feedback loops that typically accelerate selloffs. Without the ability to transact instantly, panic-driven cascades are less likely to take hold. Even in the presence of adverse information, the structure enforces a degree of patience. In many cases, that forced patience preserves value that might otherwise be destroyed in a rapid, liquidity-driven decline.

How Market Structure Shapes the Impact of Information

In private markets, the defining constraint is not access to information but the ability to act on it. When an informed investor receives negative news at t=1, the response is slowed by design. Unlike public equities, positions cannot be unwound instantly. Ownership restrictions, negotiated transactions, and a limited buyer base introduce friction that delays any attempt to exit.

This illiquidity effectively imposes a holding period. Even when the incentive to sell is clear, the mechanics of private transactions—approvals, diligence, and buyer sourcing—prevent rapid movement. Information still circulates among investors, but it does not translate into immediate trading activity. Instead of triggering a sharp, synchronized selloff, reactions unfold gradually as participants assess their options within these constraints.

As the signal becomes more widely known, investor behavior tends to diverge rather than converge. Some attempt to sell when opportunities arise, while others hold, either by choice or necessity. Without continuous liquidity, the market avoids the kind of one-sided cascade often seen in public markets. The result is a more balanced distribution of responses rather than a dominant rush for the exits.

Meanwhile, the underlying asset continues to operate. Cash flows are generated, customers are served, and production continues. This ongoing activity provides a stabilizing anchor for valuation. Prices may adjust in the short term—moving from an initial level to a lower range during the impact phase—but the absence of forced, rapid selling prevents a downward spiral. Over time, as uncertainty resolves and fundamentals reassert themselves, valuations can stabilize and even recover.

The timeline in this environment stretches from days to years. Time, rather than speed, becomes the mechanism through which information is absorbed. Pricing is episodic, tied to actual transactions and operating performance rather than continuous sentiment and trading flows. This structure dampens panic-driven price discovery and limits the amplification effects that often accelerate declines in liquid markets.

The outcome is a system where illiquidity acts as both a constraint and a form of protection. Investors accept reduced flexibility in exchange for a potential return premium, but that same rigidity can preserve value during periods of negative information or temporary disruption. The broader implication is clear: information advantages exist in all markets, but the structure of the market determines how those advantages translate into price movements. In liquid environments, information can trigger rapid value destruction. In illiquid ones, shocks are often absorbed more slowly, giving fundamentals time to recover.

When Policy Becomes the Signal

Markets are driven by information—earnings releases, product cycles, regulatory approvals, and supply disruptions. Investors compete to interpret these signals faster and more accurately than others. But not all signals originate within companies or industries. At times, they emerge from inside government.

Legislators occupy a uniquely sensitive position in this information landscape. Members of Congress are routinely briefed on regulatory developments, national security matters, industry investigations, and macroeconomic policy shifts well before any of this becomes public. These briefings are part of governance, not investment guidance, but they place policymakers unusually close to information that can move markets.

This proximity has drawn attention in discussions around congressional trading. In 2025, a number of lawmakers from both major parties reported investment returns that materially exceeded the broader market. Some outperformed the S&P 500 by a wide margin. The data does not establish misconduct, but it highlights why scrutiny persists. When individuals positioned near the source of policy signals consistently outperform, it raises the question of whether access itself creates an advantage.

What makes this dynamic particularly complex is that it does not require classic insider trading to matter. Policy direction, regulatory timing, and sector-level shifts can influence entire industries. An investor who understands those trajectories early—whether through formal briefings or indirect signals—can position capital ahead of the broader market. In that sense, congressional trading sits at the intersection of policy awareness and investment decision-making.

Government action has the power to reshape sectors such as defense, healthcare, technology, and energy. Early insight into the direction of legislation or regulation provides critical context for allocating capital. Even without granular details, understanding when policy is likely to move can be as valuable as knowing its final form. Markets often begin repricing assets in anticipation of regulatory change long before laws are enacted.

The structure of disclosure adds another layer. While trades by lawmakers must be reported under the STOCK Act, those disclosures typically occur with a delay, limiting real-time transparency. At the same time, the information networks surrounding policymaking—committee work, staff briefings, industry consultations—frequently overlap with the channels through which market expectations are formed.

The broader issue is not confined to legality alone. It centers on structural proximity to information. The pattern observed in congressional trading reflects a more general principle that applies across markets. Investors consistently seek to move closer to the sources of signals that shape outcomes. Whether those signals originate within corporations, supply chains, or government institutions, the underlying behavior is the same: gain early insight, interpret it ahead of others, and position capital accordingly.

The Bipartisan Edge: Information Advantage Is Structural, Not Political

Debates about congressional trading often slip into partisan framing. One side points fingers at the other, individual names dominate headlines, and the discussion becomes political. But viewed structurally, the pattern looks different. If an advantage exists, it does not belong to a party. It belongs to position.

The data makes this clear. Lawmakers from both major parties who outperformed the S&P 500 in 2025 delivered strikingly similar average returns. Republicans averaged around 43 percent, while Democrats came in near 39 percent. The gap between them is small relative to the distance separating both groups from the broader market. The symmetry matters more than the difference.

That symmetry points to how information advantages actually function. Markets are indifferent to ideology; they respond to access. Anyone operating near the center of policy formation is closer to signals that can move entire industries. Regulatory direction, committee activity, fiscal decisions, and geopolitical developments often shape capital flows well before they become widely understood.

From that perspective, the chart is less about politics and more about institutional design. The edge appears where information originates. In this case, proximity to policymaking correlates with outcomes that exceed the broader market.

The pattern spans the political spectrum, reinforcing that ideology is not the driver. The magnitude of returns—averaging near 40 percent—stands well above typical benchmarks and naturally invites scrutiny. What both groups share is not a worldview, but access. Members of Congress participate in briefings, committee sessions, regulatory discussions, and industry consultations that expose them to emerging policy signals ahead of public narratives.

Markets tend to reprice industries as soon as the direction of policy becomes clear, often long before legislation is finalized. In that environment, timing can matter as much as substance. Recognizing when regulatory momentum is building allows investors to position early, even without knowing the final outcome. At the same time, the informational ecosystem around government is dense. Lawmakers interact continuously with regulators, lobbyists, industry leaders, and analysts, creating a flow of insight that most investors do not see.

Disclosure rules add another layer of complexity. While trades must be reported, they are often disclosed weeks after execution, limiting real-time transparency and making it difficult for outsiders to evaluate decisions as they happen. This shifts the discussion away from individual behavior and toward structural conditions.

The broader implication is consistent with patterns seen across insider trading cases. Whether in corporate settings or within government, the same instinct recurs: move closer to the source of information, interpret it early, and act before it is widely reflected in prices. When that proximity exists inside institutions with direct influence over policy, the boundary between governance and market advantage becomes a focal point of public scrutiny.

The Geography of Advantage: Networks, Not Individuals

Discussions about insider advantage often focus on individuals—a trader, a CEO, a policymaker. But in practice, information advantages rarely exist in isolation. They are embedded within networks: political, regulatory, industrial, and financial systems that intersect around positions of influence.

Shifting the perspective from individuals to geography reveals this more clearly. When the average returns of congressional traders who outperformed the S&P 500 in 2025 are grouped by the states they represent, the dispersion is notable. Some states show average returns exceeding 70 percent, while others cluster closer to 30 percent. Even at the lower end, performance still materially surpasses the broader market.

At first glance, this variation can appear random. In reality, geography often reflects deeper structural forces. Certain states are hubs for specific industries—defense, healthcare, energy, or technology—each of which interacts heavily with regulation and policy. Others are represented by lawmakers with influential committee roles or deeper involvement in oversight. Some are closely tied to major financial centers or contracting ecosystems. Geography, in this sense, becomes a proxy for proximity to dense information environments.

Viewed this way, the chart is less about location and more about the networks that operate within those locations. Legislators are embedded in webs of relationships that include regulators, corporate leaders, lobbyists, and policy advisors. These relationships generate a steady flow of information, often before it becomes visible in public markets. The structure of these networks determines how early signals are encountered and how quickly they can be interpreted.

Industry concentration plays a central role. States with large defense sectors, healthcare clusters, or energy infrastructure tend to have more frequent interaction with policymakers, increasing exposure to regulatory direction and funding decisions. Committee assignments further shape access. Lawmakers involved in finance, technology, defense, or healthcare oversight are often closer to emerging policy signals that directly affect those sectors.

Information frequently originates in these localized ecosystems before scaling to the national level. Industries engage with policymakers continuously, providing feedback that informs legislation and regulatory priorities. As a result, early signals are often regional before they become broadly recognized by the market.

The magnitude of returns in some states—exceeding 60 percent on average—underscores the scale of divergence from typical market performance. At the same time, the variation across states suggests that information access is uneven. Some lawmakers are positioned at dense intersections of policy and industry, while others operate further from those crossroads.

This dynamic does not require illegal behavior to exist. Simply participating in policy discussions and industry interactions can provide earlier context about regulatory direction or government spending. As a result, institutional investors, consultants, and lobbyists invest heavily in accessing and interpreting these same networks.

The broader pattern is consistent with what appears across insider trading cases. The edge is rarely about superior intelligence alone. It is about structural positioning—being closer to the conversations, the decisions, and the signals that ultimately move markets.

The Proximity Premium: When Access Becomes the Edge

At the core of every insider trading case is the same underlying question: where does the advantage actually come from? Is it superior analysis, better models, or unusual foresight—or something far simpler, like being closer to information before the market fully absorbs it?

This question becomes tangible when looking at high-profile portfolio performance. Over the past decade, the investment portfolio associated with Nancy Pelosi’s household has significantly outperformed widely respected benchmarks. Set against the S&P 500—a proxy for the broader U.S. equity market—and Berkshire Hathaway—a benchmark for disciplined long-term capital allocation—the divergence is substantial.

From 2014 through 2025, the portfolio delivers returns that exceed both comparators by a wide margin. The compounded annual growth rate sits well above the market, and the cumulative return over that period surpasses even Berkshire Hathaway’s performance. Yet the pattern is not uniform. In the most recent one-year window, the broader market actually outperforms, underscoring that even exceptional long-term results can be uneven in the short run.

That inconsistency is revealing. Sustained outperformance does not necessarily imply superior forecasting ability. More often, it reflects periods where investors are positioned closer to information flows that shape specific sectors. Policy debates around semiconductors, technology regulation, healthcare reimbursement, and defense spending frequently intersect with industries represented in congressional portfolios. When those signals are understood early—before they become widely priced into the market—they can create a measurable advantage.

Over time, even a modest informational edge compounds. A growth rate approaching 20 percent annually across more than a decade produces exponential results, turning incremental advantages into large cumulative gains. These outcomes rarely stem from a single decision. They emerge from repeated positioning across multiple cycles, each time recognizing and acting on signals before the broader market fully adjusts.

The comparison to Berkshire Hathaway is particularly instructive. Warren Buffett’s firm is widely regarded as a benchmark for disciplined, long-term investing. Exceeding that standard naturally draws attention, not because it proves misconduct, but because it raises questions about the underlying source of the edge.

Much of the debate centers on proximity. Critics argue that policymakers operate too close to the signals that influence markets, while defenders maintain that such portfolios reflect conventional investment decisions. Regardless of where one lands, the broader lesson extends beyond any individual case.

Across markets, the pattern is consistent. Whether the signal originates in corporate earnings, regulatory shifts, supply chain disruptions, or government briefings, the instinct is the same: move closer to the source of information, interpret it early, and act before it becomes consensus. The advantage is rarely mysterious. It is structural. The closer an investor is to the signal before it spreads, the greater the benefit when markets eventually adjust.

Sources & References

Quiverquant. Nancy Pelosi Strategies. https://www.quiverquant.com/strategies/s/Nancy%20Pelosi/

Berkshire Hathaway. Company returns. https://berkshirehathaway.com/2025ar/2025ar.pdf