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Tax Changes and Asset Pricing: Time-Series Evidence

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  • Clemens Sialm

Abstract

The effective tax rate on equity securities has fluctuated considerably in the U.S. between 1917-2004. This study investigates whether personal taxes on equity securities are related to stock valuations using the time-series variation in tax burdens. The paper finds an economically and statistically significant relationship between asset valuations and personal tax rates. Consistent with tax capitalization, stock valuations tend to be relatively low when tax burdens are relatively high.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 11756.

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Date of creation: Nov 2005
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Publication status: published as Clemens Sialm, 2009. "Tax Changes and Asset Pricing," American Economic Review, American Economic Association, vol. 99(4), pages 1356-83, September.
Handle: RePEc:nbr:nberwo:11756

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Cited by:
  1. Garlappi, Lorenzo & Huang, Jennifer, 2006. "Are stocks desirable in tax-deferred accounts?," Journal of Public Economics, Elsevier, vol. 90(12), pages 2257-2283, December.
  2. Gene Amromin & Paul Harrison & Steven Sharpe, 2008. "How Did the 2003 Dividend Tax Cut Affect Stock Prices?," Financial Management, Financial Management Association International, vol. 37(4), pages 625-646, December.
  3. Clemens Sialm, 2009. "Tax Changes and Asset Pricing," American Economic Review, American Economic Association, vol. 99(4), pages 1356-83, September.
  4. Rapp, Marc Steffen & Schwetzler, Bernhard, 2008. "Equilibrium security prices with capital income taxes and an exogenous interest rate," CEFS Working Paper Series 2008-08, Center for Entrepreneurial and Financial Studies (CEFS), Technische Universität München.
  5. Clemens Sialm, 2006. "Investment Taxes and Equity Returns," NBER Working Papers 12146, National Bureau of Economic Research, Inc.

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