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Tax Changes and Asset Pricing: Time-Series Evidence

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Clemens Sialm

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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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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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Handle: RePEc:nbr:nberwo:11756

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Find related papers by JEL classification:
G12 - Financial Economics - - General Financial Markets - - - Asset Pricing
H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Clemens Sialm, 2006. "Investment Taxes and Equity Returns," NBER Working Papers 12146, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  2. Eugene Amromin & Paul Harrison & Steven Sharpe, 2006. "How did the 2003 dividend tax cut affect stock prices?," Working Paper Series WP-06-17, Federal Reserve Bank of Chicago. [Downloadable!]
    Other versions:
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