IDEAS home Printed from https://ideas.repec.org/a/gam/jjrfmx/v13y2020i4p72-d345104.html
   My bibliography  Save this article

The Impact of Tax Preferences on the Investment Attractiveness of Bonds for Retail Investors: The Case of Russia

Author

Listed:
  • Natalia B. Boldyreva

    (Department of Economics and Finance, University of Tyumen, 6, Volodarskogo Str., 625003 Tyumen, Russia)

  • Liudmila G. Reshetnikova

    (Department of Economics and Finance, University of Tyumen, 6, Volodarskogo Str., 625003 Tyumen, Russia)

  • Elena A. Tarkhanova

    (Department of Economics and Finance, University of Tyumen, 6, Volodarskogo Str., 625003 Tyumen, Russia)

  • Zhanna V. Pisarenko

    (Department of Risk management and Insurance, Saint-Petersburg State University, 7-9, Universitetskaya nab., 199034 St. Petersburg, Russia)

  • Svetlana A. Kalayda

    (Department of Risk management and Insurance, Saint-Petersburg State University, 7-9, Universitetskaya nab., 199034 St. Petersburg, Russia)

Abstract

The impact of tax incentives on the investment attractiveness of bonds for retail investors is assessed in the article. The paper presents a comparative empirical analysis of investment attractiveness of Russian bonds and bank deposits for domestic retail investors. We identify investment preferences of retail investors in Russia, analyze investment characteristics of deposits in Russian banks and a variety of bonds available for retail investors. Given the tax benefits of the recently introduced Individual Investment Account, we show that the real yield of investment in government bonds is over eight times higher than the yield of bank deposits. Despite higher risks of investing in bonds, we conclude that government bonds taking into account the tax benefits of the Individual Investment Account could be a realistic alternative to bank deposits for Russian retail investors.

Suggested Citation

  • Natalia B. Boldyreva & Liudmila G. Reshetnikova & Elena A. Tarkhanova & Zhanna V. Pisarenko & Svetlana A. Kalayda, 2020. "The Impact of Tax Preferences on the Investment Attractiveness of Bonds for Retail Investors: The Case of Russia," JRFM, MDPI, vol. 13(4), pages 1-11, April.
    • Handle: RePEc:gam:jjrfmx:v:13:y:2020:i:4:p:72-:d:345104
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/1911-8074/13/4/72/pdf
    Download Restriction: no
    File URL: https://www.mdpi.com/1911-8074/13/4/72/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Alexander Miller & Andrey Miller, 2015. "Evaluation the Role of Securities Market in Increasing the Regional Budget Revenues," Economy of region, Centre for Economic Security, Institute of Economics of Ural Branch of Russian Academy of Sciences, vol. 1(3), pages 216-227.
    2. Samvel S. Lazaryan & Mariya A. Chernotalova, 2017. "Taxes Impact on Private Investment," Finansovyj žhurnal — Financial Journal, Financial Research Institute, Moscow 125375, Russia, issue 3, pages 71-84, June.
    3. Kitao, Sagiri, 2015. "Pension reform and individual retirement accounts in Japan," Journal of the Japanese and International Economies, Elsevier, vol. 38(C), pages 111-126.
    4. Juan Ayuso & Juan F. Jimeno & Ernesto Villanueva, 2019. "The effects of the introduction of tax incentives on retirement saving," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 10(3), pages 211-249, November.
    5. Daniel Kahneman & Amos Tversky, 2013. "Prospect Theory: An Analysis of Decision Under Risk," World Scientific Book Chapters, in: Leonard C MacLean & William T Ziemba (ed.), HANDBOOK OF THE FUNDAMENTALS OF FINANCIAL DECISION MAKING Part I, chapter 6, pages 99-127, World Scientific Publishing Co. Pte. Ltd..
    6. Christina D. Romer & David H. Romer, 2010. "The Macroeconomic Effects of Tax Changes: Estimates Based on a New Measure of Fiscal Shocks," American Economic Review, American Economic Association, vol. 100(3), pages 763-801, June.
    7. Fjesme, Sturla Lyngnes, 2020. "Retail investor experience, asset learning, and portfolio risk-adjusted returns," Finance Research Letters, Elsevier, vol. 36(C).
    8. Orazio Attanasio & James Banks & Matthew Wakefield, 2004. "Effectiveness of tax incentives to boost (retirement) saving: theoretical motivation and empirical evidence," IFS Working Papers W04/33, Institute for Fiscal Studies.
    9. E. V. Inozemtsev & E. B. Tarassov., 2018. "Actively managed Russian mutual funds: Good or bad for investors?," VOPROSY ECONOMIKI, N.P. Redaktsiya zhurnala "Voprosy Economiki", vol. 3.
    10. Orazio P. Attanasio & Thomas DeLeire, 2002. "The Effect Of Individual Retirement Accounts On Household Consumption And National Saving," Economic Journal, Royal Economic Society, vol. 112(6), pages 504-538, July.
    11. Brad M. Barber & Terrance Odean, 2000. "Trading Is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors," Journal of Finance, American Finance Association, vol. 55(2), pages 773-806, April.
    12. Karzanova I.V., 2002. "Estimation of Effect of Taxation on Real Sector Investment in Russia: Calculation of Marginal Effective Tax Rates," Higher School of Economics Economic Journal Экономический журнал Высшей школы экономики, CyberLeninka;Федеральное государственное автономное образовательное учреждение высшего образования «Национальный исследовательский университет «Высшая школа экономики», vol. 6(2), pages 225-250.
    13. repec:bla:jfinan:v:53:y:1998:i:5:p:1775-1798 is not listed on IDEAS
    14. Litzenberger, Robert H. & Ramaswamy, Krishna, 1979. "The effect of personal taxes and dividends on capital asset prices : Theory and empirical evidence," Journal of Financial Economics, Elsevier, vol. 7(2), pages 163-195, June.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Olga S. Belomyttseva & Larisa S. Grinkevich & Anastasiia M. Grinkevich & Samo Bobek & Polona Tominc, 2018. "Tax incentives for bond-oriented individual investors: evidence from the Russian Federation," Journal of Tax Reform, Graduate School of Economics and Management, Ural Federal University, vol. 4(2), pages 108-124.
    2. Barberis, Nicholas & Xiong, Wei, 2012. "Realization utility," Journal of Financial Economics, Elsevier, vol. 104(2), pages 251-271.
    3. H.Kent Baker & Gary E. Powell & E.Theodore Veit, 2002. "Revisiting the dividend puzzle," Review of Financial Economics, John Wiley & Sons, vol. 11(4), pages 241-261.
    4. Camille Magron & Maxime Merli, 2012. "Stocks repurchase and sophistication of individual investors," Working Papers of LaRGE Research Center 2012-02, Laboratoire de Recherche en Gestion et Economie (LaRGE), Université de Strasbourg.
    5. Jakusch, Sven Thorsten, 2017. "On the applicability of maximum likelihood methods: From experimental to financial data," SAFE Working Paper Series 148, Leibniz Institute for Financial Research SAFE, revised 2017.
    6. Ivkovic, Zoran & Weisbenner, Scott, 2009. "Individual investor mutual fund flows," Journal of Financial Economics, Elsevier, vol. 92(2), pages 223-237, May.
    7. Jonathan E. Ingersoll Jr. & Lawrence J. Jin, 2014. "Realization Utility with Reference-Dependent Preferences," Papers 1408.2859, arXiv.org.
    8. Jean-Philippe Bouchaud & Damien Challet, 2016. "Why have asset price properties changed so little in 200 years," Papers 1605.00634, arXiv.org.
    9. Piet Eichholtz & Erkan Yönder, 2015. "CEO Overconfidence, REIT Investment Activity and Performance," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 43(1), pages 139-162, March.
    10. Cary Frydman & Nicholas Barberis & Colin Camerer & Peter Bossaerts & Antonio Rangel, 2014. "Using Neural Data to Test a Theory of Investor Behavior: An Application to Realization Utility," Journal of Finance, American Finance Association, vol. 69(2), pages 907-946, April.
    11. Jarkko Harju, 2013. "Voluntary Pension Savings and Tax Incentives: Evidence from Finland," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 69(1), pages 3-29, March.
    12. Betül Çal, 2015. "Reconciliation of Expectancy-Valence and Expectation-Disconfirmation Paradigms in Investment Decisions: Case of Turkish Equity Investors," International Journal of Business and Social Research, MIR Center for Socio-Economic Research, vol. 5(1), pages 15-32, January.
    13. Immacolata Marino & Filippo Pericoli & Luigi Ventura, 2011. "Tax Incentives and Household Investment in Complementary Pension Insurance: Some Recent Evidence From the Italian Experience," Risk Management and Insurance Review, American Risk and Insurance Association, vol. 14(2), pages 247-263, September.
    14. Baker, Malcolm & Coval, Joshua & Stein, Jeremy C., 2007. "Corporate financing decisions when investors take the path of least resistance," Journal of Financial Economics, Elsevier, vol. 84(2), pages 266-298, May.
    15. Choi, Darwin, 2019. "Disposition sales and stock market liquidity," Journal of Financial Markets, Elsevier, vol. 45(C), pages 19-36.
    16. Fong, Wai Mun & Lean, Hooi Hooi & Wong, Wing Keung, 2008. "Stochastic dominance and behavior towards risk: The market for Internet stocks," Journal of Economic Behavior & Organization, Elsevier, vol. 68(1), pages 194-208, October.
    17. Francisco Gomes & Michael Haliassos & Tarun Ramadorai, 2021. "Household Finance," Journal of Economic Literature, American Economic Association, vol. 59(3), pages 919-1000, September.
    18. Luigi Guiso & Tullio Jappelli, 2008. "Financial Literacy and Portfolio Diversification," Economics Working Papers ECO2008/31, European University Institute.
    19. Jakusch, Sven Thorsten & Meyer, Steffen & Hackethal, Andreas, 2019. "Taming models of prospect theory in the wild? Estimation of Vlcek and Hens (2011)," SAFE Working Paper Series 146, Leibniz Institute for Financial Research SAFE, revised 2019.
    20. Kuo-Hwa Chang & Michael Nayat Young, 2019. "Portfolios Optimizations of Behavioral Stocks with Perception Probability Weightings," Annals of Economics and Finance, Society for AEF, vol. 20(2), pages 817-845, November.

    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:gam:jjrfmx:v:13:y:2020:i:4:p:72-:d:345104. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: MDPI Indexing Manager (email available below). General contact details of provider: https://www.mdpi.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.