Tax-Induced Trading: The Effect of the 1986 Tax Reform Act on Stock Market Activity
The end of favorable tax treatment for long-term capital gains caused investors to reassess traditional tax-induced trading strategies. This study compares trading behavior in December 1986 and January 1987 with previous years. The authors results indicate that these tax code changes had a powerful effect on trading behavior. Relative trading volume was considerably higher in December 1986 for long-term winners, but not significantly lower for long-term losers. Results also indicate altered trading patterns based on short-term gains in December 1986 and for long-term winners in January 1987. Copyright 1989 by American Finance Association.
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Volume (Year): 44 (1989)
Issue (Month): 2 (June)
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