IDEAS home Printed from https://ideas.repec.org/a/bla/jfinan/v59y2004i3p999-1037.html
   My bibliography  Save this article

Optimal Asset Location and Allocation with Taxable and Tax-Deferred Investing

Author

Listed:
  • Robert M. Dammon

    (Carnegie Mellon University)

  • Chester S. Spatt

    (Carnegie Mellon University)

  • Harold H. Zhang

    (University of North Carolina at Chapel Hill)

Abstract

We investigate optimal intertemporal asset allocation and location decisions for investors making taxable and tax-deferred investments. We show a strong preference for holding taxable bonds in the tax-deferred account and equity in the taxable account, reflecting the higher tax burden on taxable bonds relative to equity. For most investors, the optimal asset location policy is robust to the introduction of tax-exempt bonds and liquidity shocks. Numerical results illustrate optimal portfolio decisions as a function of age and tax-deferred wealth. Interestingly, the proportion of total wealth allocated to equity is inversely related to the fraction of total wealth in tax-deferred accounts. Copyright 2004 by The American Finance Association.

Suggested Citation

  • Robert M. Dammon & Chester S. Spatt & Harold H. Zhang, 2004. "Optimal Asset Location and Allocation with Taxable and Tax-Deferred Investing," Journal of Finance, American Finance Association, vol. 59(3), pages 999-1037, June.
  • Handle: RePEc:bla:jfinan:v:59:y:2004:i:3:p:999-1037
    as

    Download full text from publisher

    File URL: http://www.blackwell-synergy.com/servlet/useragent?func=synergy&synergyAction=showTOC&journalCode=jofi&volume=59&issue=3&year=2004&part=null
    File Function: link to full text
    Download Restriction: Access to full text is restricted to subscribers.

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:jfinan:v:59:y:2004:i:3:p:999-1037. 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). General contact details of provider: http://edirc.repec.org/data/afaaaea.html .

    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.

    We have no references for this item. You can help adding them by using 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.