Taxes and Investment Choice
Taxes have a first-order effect on investors' trading decisions and portfolio choices and on the equilibrium pricing of assets. In this review, we investigate how certain features of the tax code impact investors and asset markets. We begin by considering how tax heterogeneity across investors and across securities can lead to market segmentation and discuss the nature of equilibrium prices and allocations with tax clienteles. We then turn our attention to the optimal trading of assets when the tax on capital gains and losses is deferred until the asset is sold. In the absence of portfolio considerations, the optimal trading policies are driven entirely by the desire of investors to minimize the tax cost of owning assets. We next focus on an investor's lifetime portfolio choice problem with capital gains taxes and discuss how the investor's optimal trading decisions and portfolio choices are influenced by both tax and diversification motives. Our discussion includes consideration of nonfinancial income, tax-deferred investment opportunities, and multiple risky assets.
If you experience problems downloading a file, check if you have the proper application to view it first. 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.
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.
Volume (Year): 4 (2012)
Issue (Month): 1 (October)
|Contact details of provider:|| Postal: |
Web page: http://www.annualreviews.org
|Order Information:||Web: http://www.annualreviews.org/action/ecommerce|
When requesting a correction, please mention this item's handle: RePEc:anr:refeco:v:4:y:2012:p:411-429. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (http://www.annualreviews.org)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.