This file is part of IDEAS, which uses RePEc data


[ Papers | Articles | Software | Books | Chapters | Authors | Institutions | JEL Classification | NEP reports | Search | New papers by email | Author registration | Rankings | Volunteers | FAQ | Blog | Help! ]

Tax Induced Trading: The Effect of the 1986 Tax Reform Act on Stock Market Activity

Author info | Abstract | Publisher info | Download info | Related research | Statistics
Author Info
Paul J. Bolster
Lawrence B. Lindsey
Andrew W. Mitrusi
Abstract

The abolition of the favorable tax treatment of long term capital gains forced investors to reassess traditional year-end trading strategies used to manage tax liabilities. This study compares with year-end trading behavior in previous years with that observed at the end of 1986. Traditional strategies involve selling both short and long term losers and holding short and long term winners. Our results affirm previous findings concerning tax induced trading at year end. However, for 1986, we find that the anticipated tax code changes had a powerful effect on trading behavior. Compared to previous years, relative trading volume was considerably higher in December of 1986 for long term winners and lower for long term losers. Additional results indicate that traditional patterns of trading induced by short term capital gains and losses were also altered substantially in 1986.

Download Info
To download:

If you experience problems downloading a file, check if you have the proper application to view it first. Information about this may be contained in the File-Format links below. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.nber.org/papers/w2659.pdf
File Format: application/pdf
File Function:
Download Restriction: Access to the full text is generally limited to series subscribers, however if the top level domain of the client browser is in a developing country or transition economy free access is provided. More information about subscriptions and free access is available at http://www.nber.org/wwphelp.html.

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Publisher Info
Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 2659.

Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Length:
Date of creation: May 1990
Date of revision:
Handle: RePEc:nbr:nberwo:2659

Note: PE
Contact details of provider:
Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Phone: 617-868-3900
Email:
Web page: http://www.nber.org
More information through EDIRC

For technical questions regarding this item, or to correct its listing, contact: ().

Related research
Keywords:

Other versions of this item:

References listed on IDEAS
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. Givoly, Dan & Ovadia, Arie, 1983. " Year-End Tax-Induced Sales and Stock Market Seasonality," Journal of Finance, American Finance Association, vol. 38(1), pages 171-85, March. [Downloadable!] (restricted)
  2. Lakonishok, Josef & Smidt, Seymour, 1986. " Volume for Winners and Losers: Taxation and Other Motives for Stock Trading," Journal of Finance, American Finance Association, vol. 41(4), pages 951-74, September. [Downloadable!] (restricted)
  3. George M. Constantinides, 1984. "Optimal Stock Trading with Personal Taxes: Implications for Prices and the Abnormal January Returns," NBER Working Papers 1176, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  4. James M. Poterba, 1986. "How Burdensome Are Capital Gains Taxes?," Working papers 410, Massachusetts Institute of Technology (MIT), Department of Economics.
    Other versions:
  5. Dyl, Edward A, 1977. "Capital Gains Taxation and Year-End Stock Market Behavior," Journal of Finance, American Finance Association, vol. 32(1), pages 165-75, March. [Downloadable!] (restricted)
  6. Stiglitz, Joseph E., 1983. "Some aspects of the taxation of capital gains," Journal of Public Economics, Elsevier, vol. 21(2), pages 257-294, July. [Downloadable!] (restricted)
    Other versions:
  7. Feldstein, Martin & Yitzhaki, Shlomo, 1978. "The effects of the capital gains tax on the selling and switching of common stock," Journal of Public Economics, Elsevier, vol. 9(1), pages 17-36, February. [Downloadable!] (restricted)
  8. Feldstein, Martin & Slemrod, Joel & Yitzhaki, Shlomo, 1980. "The Effects of Taxation on the Selling of Corporate Stock and the Realization of Capital Gains," The Quarterly Journal of Economics, MIT Press, vol. 94(4), pages 777-91, June. [Downloadable!] (restricted)
    Other versions:
Full references

Statistics
Access and download statistics

Did you know? All the bibliographic data shown here has been contributed by volunteers, thereby helping to keep this service free.

This page was last updated on 2009-12-5.

This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.