How Do Taxes Affect Investors' Stock Market Realizations? Evidence from Tax-Return Panel Data
This article provides direct evidence on the empirical importance of tax-reduction strategies. The authors' results indicate that relatively few investors trade securities to reduce their taxes and that tax-induced trading has little effect on stock prices. Their findings suggest that, holding all else constant, stock prices are likely to be insensitive to the difference between short- and long-term capital gains tax rates. Copyright 1994 by University of Chicago Press.
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