overview of how taxation affects household portfolio structure. It begins by outlining six aspects of portfolio behavior that may be influenced by the tax system. These are asset selection, asset allocation, borrowing, asset location in taxable and tax-deferred accounts, asset turnover, and whether to hold assets directly or through financial intermediaries. The analysis considers how ignoring tax considerations may bias estimates of how other variables, such as income or net worth, affect the structure of household portfolios. The paper then describes the tax rules that apply to various portfolio instruments in a range of major industrialized nations. This illustrates the wide variation in the potential impact of tax rules on portfolio choice. Finally, the paper selectively reviews the existing evidence on how taxation affects portfolio choice. A small but growing literature, primarily based on the analysis of U.S. data, suggests that taxes have important effects on several aspects of portfolio choice. There remain a number of decisions, however, for which it appears difficult to reconcile household choices with tax-efficient behavior.
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number
8223.
Length: Date of creation: Apr 2001 Date of revision: Handle: RePEc:nbr:nberwo:8223
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Find related papers by JEL classification: H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
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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.:
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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.)
Christopher D. Carroll, 2000.
"Portfolios of the Rich,"
NBER Working Papers
7826, National Bureau of Economic Research, Inc.
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Other versions:
Torfinn Harding, Haakon O. Aa. Solheim og Andreas Benedictow, 2004.
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