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The Evolution of Aggregate Stock Ownership - A Unified Explanation

  • Rydqvist, Kristian

    ()

    (Binghamton University)

  • Spizman, Joshua

    ()

    (Binghamton University)

  • Strebulaev, Ilya

    ()

    (Stanford University)

Since World War II, direct stock ownership by households has largely been replaced by indirect stock ownership by financial institutions. We argue that tax policy is the driving force. Using long time-series from eight countries, we show that the fraction of household ownership decreases with measures of the tax benefits of holding stocks inside a pension plan. This finding is important for policy considerations on effctive taxation and for financial economics research on the long-term effects of taxation on corporate finance and asset prices.

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Paper provided by Institute for Financial Research in its series SIFR Research Report Series with number 68.

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Length: 53 pages
Date of creation: 15 Sep 2009
Date of revision:
Handle: RePEc:hhs:sifrwp:0068
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  1. Miller, Merton H, 1977. "Debt and Taxes," Journal of Finance, American Finance Association, vol. 32(2), pages 261-75, May.
  2. Julian Franks & Colin Mayer & Hannes Wagner, 2006. "The Origins of the German Corporation - Finance, Ownership and Control," Review of Finance, European Finance Association, vol. 10(4), pages 537-585, December.
  3. Eugene Fama & F. & Kenneth R. French, . "The Equity Premium."," CRSP working papers 522, Center for Research in Security Prices, Graduate School of Business, University of Chicago.
  4. Raj Chetty & Emmanuel Saez, 2004. "Dividend Taxes and Corporate Behavior: Evidence from the 2003 Dividend Tax Cut," NBER Working Papers 10841, National Bureau of Economic Research, Inc.
  5. J. B. Chay & Dosoung Choi & Jeffrey Pontiff, 2006. "Market Valuation of Tax-Timing Options: Evidence from Capital Gains Distributions," Journal of Finance, American Finance Association, vol. 61(2), pages 837-865, 04.
  6. Richard C. Green & Burton Hollifield, . "The Personal-Tax Advantages of Equity," GSIA Working Papers 2000-E10, Carnegie Mellon University, Tepper School of Business.
  7. Ishi, Hiromitsu, 2001. "The Japanese Tax System," OUP Catalogue, Oxford University Press, edition 3, number 9780199242566, March.
  8. Lakonishok, Josef & Vermaelen, Theo, 1983. " Tax Reform and Ex-Dividend Day Behavior," Journal of Finance, American Finance Association, vol. 38(4), pages 1157-79, September.
  9. Kenneth R. French, 2008. "Presidential Address: The Cost of Active Investing," Journal of Finance, American Finance Association, vol. 63(4), pages 1537-1573, 08.
  10. Clemens Sialm, 2009. "Tax Changes and Asset Pricing," American Economic Review, American Economic Association, vol. 99(4), pages 1356-83, September.
  11. Valery Polkovnichenko, 2005. "Household Portfolio Diversification: A Case for Rank-Dependent Preferences," Review of Financial Studies, Society for Financial Studies, vol. 18(4), pages 1467-1502.
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