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Inflation, tax rules and the stock market

  • Feldstein, Martin

This paper shows how the interaction of tax rules and expected inflation can decrease substantially the share price per dollar of pretax earnings. The current analysis extends my earlier study [Feldstein (1978)] by recognizing corporate debt, retained earnings, and the role of diverse shareholder investments. As before, the analysis separates household and institutional investors.

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File URL: http://www.sciencedirect.com/science/article/B6VBW-476DVJ2-1/2/0caf2cd066db0f0ea9e9573f7f5ec745
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Article provided by Elsevier in its journal Journal of Monetary Economics.

Volume (Year): 6 (1980)
Issue (Month): 3 (July)
Pages: 309-331

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Handle: RePEc:eee:moneco:v:6:y:1980:i:3:p:309-331
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505566

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  1. Patric H. Hendershott & Sheng Cheng Hu, 1979. "Inflation and the Benefits from Owner-Occupied Housing," NBER Working Papers 0383, National Bureau of Economic Research, Inc.
  2. David F. Bradford, 1979. "The Incidence and Allocation Effects of a Tax on Corporate Distributions," NBER Working Papers 0349, National Bureau of Economic Research, Inc.
  3. Sheshinski, Eytan & Feldstein, Martin & Green, Jerry & Auerbach, Alan, 1978. "Inflation and Taxes in a Growing Economy with Debt and Equity Finance," Scholarly Articles 3203645, Harvard University Department of Economics.
  4. Motley, Brian, 1969. "Inflation and Common Stock Values: Comment," Journal of Finance, American Finance Association, vol. 24(3), pages 530-35, June.
  5. Martin Feldstein, 1983. "Inflation and the Stock Market," NBER Chapters, in: Inflation, Tax Rules, and Capital Formation, pages 186-198 National Bureau of Economic Research, Inc.
  6. Hong, Hai, 1977. "Inflation and the Market Value of the Firm: Theory and Tests," Journal of Finance, American Finance Association, vol. 32(4), pages 1031-48, September.
  7. Feldstein, Martin & Sheshinski, Eytan & Green, Jerry, 1979. "Corporate Financial Policy and Taxation in a Growing Economy," Scholarly Articles 3203643, Harvard University Department of Economics.
  8. Martin Feldstein & Lawrence H. Summers, 1979. "Inflation and the Taxation of Capital Income in the Corporate Sector," NBER Working Papers 0312, National Bureau of Economic Research, Inc.
  9. Martin Feldstein, 1983. "Fiscal Policies, Inflation, and Capital Formation," NBER Chapters, in: Inflation, Tax Rules, and Capital Formation, pages 61-80 National Bureau of Economic Research, Inc.
  10. Auerbach, Alan J., 1979. "Share valuation and corporate equity policy," Journal of Public Economics, Elsevier, vol. 11(3), pages 291-305, June.
  11. James Tobin & William C. Brainard, 1976. "Asset Markets and the Cost of Capital," Cowles Foundation Discussion Papers 427, Cowles Foundation for Research in Economics, Yale University.
  12. Martin Feldstein, 1978. "The Effect of Inflation on the Prices of Land And Gold," NBER Working Papers 0296, National Bureau of Economic Research, Inc.
  13. Martin Feldstein & Lawrence Summers, 1977. "Is the Rate of Profit Falling?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 8(1), pages 211-228.
  14. Feldstein, Martin S & Slemrod, Joel, 1980. "Personal Taxation, Portfolio Choice, and the Effect of the Corporation Income Tax," Journal of Political Economy, University of Chicago Press, vol. 88(5), pages 854-66, October.
  15. Patric H. Hendershott, 1979. "The Decline in Aggregate Share Values: Inflation, Taxation, Risk and Profitability," NBER Working Papers 0370, National Bureau of Economic Research, Inc.
  16. Fama, Eugene F, 1975. "Short-Term Interest Rates as Predictors of Inflation," American Economic Review, American Economic Association, vol. 65(3), pages 269-82, June.
  17. Martin Feldstein, 1979. "Adjusting Depreciation in an Inflationary Economy: Indexing versus Acceleration," NBER Working Papers 0395, National Bureau of Economic Research, Inc.
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