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! ]

Capital Gains Holding Periods and Equity Trading: Evidence from the 1998 Tax Act

Author info | Abstract | Publisher info | Download info | Related research | Statistics
Author Info
Jennifer L. Blouin
Jana Smith Raedy
Douglas A. Shackelford
Abstract

This paper exploits an unusually powerful setting to explore a choice many individual investors face regularly the decision to sell today or postpone selling until lower rates are available in the future. We examine trading volume and stock returns around the 1998 reduction in the holding period required for individual investors to receive the most favorable long-term capital gains tax rate. For firms whose initial public shareholders were affected by the legislation, we find trading volume increasing and share returns decreasing in past price performance on the day the legislation was publicly disclosed. The results are consistent with capital gains holding periods distorting markets sufficiently that if investors are permitted to liquidate appreciated positions at favorable rates, enough will sell immediately to move prices. To our knowledge, this is the first study linking trading volume and security prices to a change in capital gains holding periods.

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/w7827.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 7827.

Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Length:
Date of creation: Aug 2000
Date of revision:
Handle: RePEc:nbr:nberwo:7827

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:

Find related papers by JEL classification:
H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
G12 - Financial Economics - - General Financial Markets - - - Asset Pricing

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. White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-38, May. [Downloadable!] (restricted)
  2. Amoako-Adu, Ben & Rashid, M. & Stebbins, M., 1992. "Capital gains tax and equity values: Empirical test of stock price reaction to the introduction and reduction of capital gains tax exemption," Journal of Banking & Finance, Elsevier, vol. 16(2), pages 275-287, April. [Downloadable!] (restricted)
  3. Jennifer L. Blouin & Jana Smith Raedy & Douglas A. Shackelford, 2000. "Capital Gains Taxes and Stock Reactions to Quarterly Earnings Announcements," NBER Working Papers 7644, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  4. William A. Reese, Jr., 1998. "Capital Gains Taxation and Stock Market Activity: Evidence from IPOs," Journal of Finance, American Finance Association, vol. 53(5), pages 1799-1819, October. [Downloadable!] (restricted)
  5. Klein, Peter, 1999. "The capital gain lock-in effect and equilibrium returns," Journal of Public Economics, Elsevier, vol. 71(3), pages 355-378, March. [Downloadable!] (restricted)
  6. James M. Poterba, 2001. "Capital Gains Tax Rules, Tax-loss Trading, and Turn-of-the-year Returns," Journal of Finance, American Finance Association, vol. 56(1), pages 353-368, 02. [Downloadable!] (restricted)
    Other versions:
  7. Guenther, David A. & Willenborg, Michael, 1999. "Capital gains tax rates and the cost of capital for small business: evidence from the IPO market," Journal of Financial Economics, Elsevier, vol. 53(3), pages 385-408, September. [Downloadable!] (restricted)
Full references

Statistics
Access and download statistics

Did you know? Cannot find something on IDEAS? Encourage the publisher to index it! Instructions.

This page was last updated on 2009-12-16.

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.