Capital Gains Tax Rules, Tax-loss Trading, and Turn-of-the-year Returns
Changes in the capital gains tax rules facing individual investors do not affect the incentives for "window dressing" by institutional investors, but they can affect the incentives for year-end tax-induced trading by individual investors. Empirical evidence for the 1963 to 1996 period suggests that when the tax law encouraged taxable investors who accrued losses early in the year to realize their losses before year-end, the correlation between early year losses and turn-of-the-year returns was weaker than when the law did not provide such an early realization incentive. These findings suggest that tax-loss trading contributes to turn-of-the-year return patterns. Copyright The American Finance Association 2001.
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): 56 (2001)
Issue (Month): 1 (02)
|Contact details of provider:|| Web page: http://www.afajof.org/|
More information through EDIRC
|Order Information:||Web: http://www.afajof.org/membership/join.asp|
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.:
- Jones, Charles P & Pearce, Douglas K & Wilson, Jack W, 1987. " Can Tax-Loss Selling Explain the January Effect? A Note," Journal of Finance, American Finance Association, vol. 42(2), pages 453-61, June.
- Ritter, Jay R, 1988. " The Buying and Selling Behavior of Individual Investors at the Turn of the Year," Journal of Finance, American Finance Association, vol. 43(3), pages 701-17, July.
- Lakonishok, Josef, et al, 1991.
"Window Dressing by Pension Fund Managers,"
American Economic Review,
American Economic Association, vol. 81(2), pages 227-31, May.
- Michaely, Roni & Vila, Jean-Luc, 1996. "Trading Volume with Private Valuation: Evidence from the Ex-dividend Day," Review of Financial Studies, Society for Financial Studies, vol. 9(2), pages 471-509.
- Sias, Richard W & Starks, Laura T, 1997. " Institutions and Individuals at the Turn-of-the-Year," Journal of Finance, American Finance Association, vol. 52(4), pages 1543-62, September.
- Reinganum, Marc R & Shapiro, Alan C, 1987. "Taxes and Stock Return Seasonality: Evidence from the London Stock Exchange," The Journal of Business, University of Chicago Press, vol. 60(2), pages 281-95, April.
- De Bondt, Werner F M & Thaler, Richard, 1985. " Does the Stock Market Overreact?," Journal of Finance, American Finance Association, vol. 40(3), pages 793-805, July.
- Keim, Donald B., 1983. "Size-related anomalies and stock return seasonality : Further empirical evidence," Journal of Financial Economics, Elsevier, vol. 12(1), pages 13-32, June.
- 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.
- Rozeff, Michael S. & Kinney, William Jr., 1976. "Capital market seasonality: The case of stock returns," Journal of Financial Economics, Elsevier, vol. 3(4), pages 379-402, October.
- James M. Poterba, 1986.
"How Burdensome Are Capital Gains Taxes?,"
410, Massachusetts Institute of Technology (MIT), Department of Economics.
- Branch, Ben, 1977. "A Tax Loss Trading Rule," The Journal of Business, University of Chicago Press, vol. 50(2), pages 198-207, April.
- Joel M. Dickson & John B. Shoven, 1995. "Taxation and Mutual Funds: An Investor Perspective," NBER Chapters, in: Tax Policy and the Economy, Volume 9, pages 151-180 National Bureau of Economic Research, Inc.
- Dyl, Edward A. & Maberly, Edwin D., 1992. "Odd-Lot Transactions around the Turn of the Year and the January Effect," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 27(04), pages 591-604, December.
- Constantinides, George M. & Ingersoll, Jonathan Jr., 1984. "Optimal bond trading with personal taxes," Journal of Financial Economics, Elsevier, vol. 13(3), pages 299-335, September.
- Alan J. Auerbach & Leonard E. Burman & Jonathan Siegel, 1998. "Capital Gains Taxation and Tax Avoidance: New Evidence from Panel Data," NBER Working Papers 6399, National Bureau of Economic Research, Inc.
- Reinganum, Marc R., 1983. "The anomalous stock market behavior of small firms in January : Empirical tests for tax-loss selling effects," Journal of Financial Economics, Elsevier, vol. 12(1), pages 89-104, June.
- 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.
- De Bondt, Werner F M & Thaler, Richard H, 1987. " Further Evidence on Investor Overreaction and Stock Market Seasonalit y," Journal of Finance, American Finance Association, vol. 42(3), pages 557-81, July.
- Keim, Donald B., 1989. "Trading patterns, bid-ask spreads, and estimated security returns : The case of common stocks at calendar turning points," Journal of Financial Economics, Elsevier, vol. 25(1), pages 75-97, November.
When requesting a correction, please mention this item's handle: RePEc:bla:jfinan:v:56:y:2001:i:1:p:353-368. 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: (Wiley-Blackwell Digital Licensing)or (Christopher F. Baum)
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.