IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this paper

Taxation, Risk-Taking, and Household Portfolio Behavior

  • James M. Poterba

This paper summarizes the current state of research on how taxation affects household decisions with respect to portfolio structure and asset trading. It discusses long-standing issues, such as the impact of differential taxation of income flows from stocks and bonds on the incentives for households to invest in these assets, and the effect of capital gains taxation on asset sales. It also addresses a range of emerging issues, such as the impact of taxation on the behavior of mutual funds and their investors, and the effect of tax changes and tax uncertainty on investor behavior. It concludes that taxation exerts a systematic influence on the nature of risk-taking and the structure of household portfolios. Research on the effects of taxation on portfolio structure is more advanced than work on the welfare costs of portfolio distortions.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.nber.org/papers/w8340.pdf
Download Restriction: no

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 8340.

as
in new window

Length:
Date of creation: Jun 2001
Date of revision:
Publication status: published as Poterba, James M., 2002. "Taxation, risk-taking, and household portfolio behavior," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 3, chapter 17, pages 1109-1171 Elsevier.
Handle: RePEc:nbr:nberwo:8340
Note: AP PE
Contact details of provider: Postal:
National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.

Phone: 617-868-3900
Web page: http://www.nber.org
Email:


More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Poterba, James M., 1989. "Capital Gains Tax Policy Toward Entrepreneurship," National Tax Journal, National Tax Association, vol. 42(3), pages 375-89, September.
  2. Trostel, Philip A, 1993. "The Effect of Taxation on Human Capital," Journal of Political Economy, University of Chicago Press, vol. 101(2), pages 327-50, April.
  3. Schuetze, Herb J., 2000. "Taxes, economic conditions and recent trends in male self-employment: a Canada-US comparison," Labour Economics, Elsevier, vol. 7(5), pages 507-544, September.
  4. Green, Richard C & Odegaard, Bernt A, 1997. " Are There Tax Effects in the Relative Pricing of U.S. Government Bonds?," Journal of Finance, American Finance Association, vol. 52(2), pages 609-33, June.
  5. Fortune, Peter, 1988. "Municipal Bond Yields: Whose Tax Rates Matter?," National Tax Journal, National Tax Association, vol. 41(2), pages 219-33, June.
  6. Kevin A. Hassett & Gilbert E. Metcalf, 1998. "Investment With Uncertain Tax Policy: Does Random Tax Policy Discourage Investment?," Discussion Papers Series, Department of Economics, Tufts University 9823, Department of Economics, Tufts University.
  7. Stiglitz, Joseph E., 1983. "Some aspects of the taxation of capital gains," Journal of Public Economics, Elsevier, vol. 21(2), pages 257-294, July.
  8. Alan J. Auerbach, 1988. "Retrospective Capital Gains Taxation," NBER Working Papers 2792, National Bureau of Economic Research, Inc.
  9. Litzenberger, Robert H & Ramaswamy, Krishna, 1980. " Dividends, Short Selling Restrictions, Tax-Induced Investor Clienteles and Market Equilibrium," Journal of Finance, American Finance Association, vol. 35(2), pages 469-82, May.
  10. Dyl, Edward A, 1977. "Capital Gains Taxation and Year-End Stock Market Behavior," Journal of Finance, American Finance Association, vol. 32(1), pages 165-75, March.
  11. Tepper, Irwin, 1981. "Taxation and Corporate Pension Policy," Journal of Finance, American Finance Association, vol. 36(1), pages 1-13, March.
  12. Dammon, Robert M & Green, Richard C, 1987. " Tax Arbitrage and the Existence of Equilibrium Prices for Financial Assets," Journal of Finance, American Finance Association, vol. 42(5), pages 1143-66, December.
  13. Douglas A. Shackelford & Robert E. Verrecchia, 1999. "Intertemporal Tax Discontinuities," NBER Working Papers 7451, National Bureau of Economic Research, Inc.
  14. Martin Feldstein, 1978. "The Welfare Cost of Capital Income Taxation," NBER Chapters, in: Research in Taxation, pages 29-51 National Bureau of Economic Research, Inc.
  15. Martin Feldstein, 1992. "College Scholarship Rules and Private Saving," NBER Working Papers 4032, National Bureau of Economic Research, Inc.
  16. James Tobin, 1978. "A Proposal for International Monetary Reform," Eastern Economic Journal, Eastern Economic Association, vol. 4(3-4), pages 153-159, Jul/Oct.
  17. Green, Richard C, 1993. "A Simple Model of the Taxable and Tax-Exempt Yield Curves," Review of Financial Studies, Society for Financial Studies, vol. 6(2), pages 233-64.
  18. Prisman, Eliezer Z. & Roberts, Gordon S. & Tian, Yisong, 1996. "Optimal bond trading and the tax-timing option in Canada," Journal of Banking & Finance, Elsevier, vol. 20(8), pages 1351-1363, September.
  19. Kiefer, Donald W., 1990. "Lock-In Effect Within a Simple Model of Corporate Stock Trading," National Tax Journal, National Tax Association, vol. 43(1), pages 75-94, March.
  20. Alan J. Auerbach & Leonard E. Burman & Jonathan Siegel, 1998. "Capital Gains Taxation and Tax Avoidance: New Evidence from Panel Data," NBER Working Papers 6399, National Bureau of Economic Research, Inc.
  21. Lang, Mark H. & Shackelford, Douglas A., 2000. "Capitalization of capital gains taxes: evidence from stock price reactions to the 1997 rate reduction," Journal of Public Economics, Elsevier, vol. 76(1), pages 69-85, April.
  22. Ross, Stephen A, 1985. " Debt and Taxes and Uncertainty," Journal of Finance, American Finance Association, vol. 40(3), pages 637-57, July.
  23. Hamilton, Jonathan H, 1987. "Optimal Wage and Income Taxation with Wage Uncertainty," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 28(2), pages 373-88, June.
  24. Daniel R. Feenberg, 1980. "Does the Investment Interest Limitation Explain the Existence of Dividends?," NBER Working Papers 0530, National Bureau of Economic Research, Inc.
  25. Jane G. Gravelle, 1994. "The Economic Effects of Taxing Capital Income," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262071584, December.
  26. Bhardwaj, Ravinder K & Brooks, LeRoy D, 1999. "Further Evidence on Dividend Yields and the Ex-Dividend Day Stock Price Effect," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 22(4), pages 503-14, Winter.
  27. Michaely, Roni, 1991. " Ex-dividend Day Stock Price Behavior: The Case of the 1986 Tax Reform Act," Journal of Finance, American Finance Association, vol. 46(3), pages 845-59, July.
  28. Agnar Sandmo, 1977. "Portfolio Theory, Asset Demand and Taxation: Comparative Statics with Many Assets," Review of Economic Studies, Oxford University Press, vol. 44(2), pages 369-379.
  29. Scholz, John Karl, 1992. "A direct examination of the dividend clientele hypothesis," Journal of Public Economics, Elsevier, vol. 49(3), pages 261-285, December.
  30. Rebelo, Sergio, 1991. "Long-Run Policy Analysis and Long-Run Growth," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 500-521, June.
  31. Ravinder K. Bhardwaj & LeRoy D. Brooks, 1999. "Further Evidence On Dividend Yields And The Ex-Dividend Day Stock Price Effect," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 22(4), pages 503-514, December.
  32. Barclay, Michael J., 1987. "Dividends, taxes, and common stock prices : The ex-dividend day behavior of common stock prices before the income tax," Journal of Financial Economics, Elsevier, vol. 19(1), pages 31-44, September.
  33. Franklin Allen & Antonio Bernardo & Ivo Welch, . "A Theory of Dividends Based on Tax Clienteles," Rodney L. White Center for Financial Research Working Papers 15-98, Wharton School Rodney L. White Center for Financial Research.
  34. Bruce, Donald, 2000. "Effects of the United States tax system on transitions into self-employment," Labour Economics, Elsevier, vol. 7(5), pages 545-574, September.
  35. Joseph E. Stiglitz, 1968. "The Effects of Income, Wealth, and Capital Gains Taxation on Risk Taking," Cowles Foundation Discussion Papers 248, Cowles Foundation for Research in Economics, Yale University.
  36. Kalay, Avner, 1982. " The Ex-Dividend Pay Behavior of Stock Prices: A Re-Examination of the Clientele Effect," Journal of Finance, American Finance Association, vol. 37(4), pages 1059-70, September.
  37. Auerbach, Alan J., 2002. "Taxation and corporate financial policy," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 3, chapter 19, pages 1251-1292 Elsevier.
  38. Alan J. Auerbach, 1992. "On the Design and Reform of Capital Gains Taxation," NBER Working Papers 3967, National Bureau of Economic Research, Inc.
  39. Alan J. Auerbach & Jonathan M. Siegel, 2000. "Capital Gains Realizations of the Rich and Sophisticated," NBER Working Papers 7532, National Bureau of Economic Research, Inc.
  40. Mackie-Mason, Jeffrey K., 1990. "Some nonlinear tax effects on asset values and investment decisions under uncertainty," Journal of Public Economics, Elsevier, vol. 42(3), pages 301-327, August.
  41. Douglas A. Shackelford, 2000. "Stock Market Reaction to Capital Gains Tax Changes: Empirical Evidence from the 1997 and 1998 Tax Acts," NBER Chapters, in: Tax Policy and the Economy, Volume 14, pages 67-92 National Bureau of Economic Research, Inc.
  42. Auerbach, Alan J., 1983. "Stockholder tax rates and firm attributes," Journal of Public Economics, Elsevier, vol. 21(2), pages 107-127, July.
  43. Koski, Jennifer Lynch, 1996. "A Microstructure Analysis of Ex-dividend Stock Price Behavior before and after the 1984 and 1986 Tax Reform Acts," The Journal of Business, University of Chicago Press, vol. 69(3), pages 313-38, July.
  44. Constantinides, George M., 1984. "Optimal stock trading with personal taxes : Implications for prices and the abnormal January returns," Journal of Financial Economics, Elsevier, vol. 13(1), pages 65-89, March.
  45. Eades, Kenneth M & Hess, Patrick J & Kim, E Han, 1994. " Time-Series Variation in Dividend Pricing," Journal of Finance, American Finance Association, vol. 49(5), pages 1617-38, December.
  46. Judd, Kenneth L, 1998. "Taxes, Uncertainty, and Human Capital," American Economic Review, American Economic Association, vol. 88(2), pages 289-92, May.
  47. Roger H. Gordon, 1985. "Taxation of Corporate Capital Income: Tax Revenues Versus Tax Distortions," The Quarterly Journal of Economics, Oxford University Press, vol. 100(1), pages 1-27.
  48. Alan J. Auerbach, 1988. "Capital Gains Taxation in the United States: Realizations, Revenue, and Rhetoric," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 19(2), pages 595-638.
  49. Poterba, James M., 1987. "How burdensome are capital gains taxes?: Evidence from the United States," Journal of Public Economics, Elsevier, vol. 33(2), pages 157-172, July.
  50. Balcer, Yves & Judd, Kenneth L, 1987. " Effects of Capital Gains Taxation on Life-Cycle Investment and Portfolio Management," Journal of Finance, American Finance Association, vol. 42(3), pages 743-58, July.
  51. Dammon, Robert M & Spatt, Chester S, 1996. "The Optimal Trading and Pricing of Securities with Asymmetric Capital Gains Taxes and Transaction Costs," Review of Financial Studies, Society for Financial Studies, vol. 9(3), pages 921-52.
  52. Leape, Jonathan I., 1987. "Taxes and transaction costs in asset market equilibrium," Journal of Public Economics, Elsevier, vol. 33(1), pages 1-20, June.
  53. Feldstein, Martin S, 1976. "Personal Taxation and Portfolio Composition: An Econometric Analysis," Econometrica, Econometric Society, vol. 44(4), pages 631-50, July.
  54. Umlauf, Steven R., 1993. "Transaction taxes and the behavior of the Swedish stock market," Journal of Financial Economics, Elsevier, vol. 33(2), pages 227-240, April.
  55. Lord, William & Rangazas, Peter, 1998. "Capital Accumulation and Taxation in a General Equilibrium Model with Risky Human Capital," Journal of Macroeconomics, Elsevier, vol. 20(3), pages 509-531, July.
  56. Long, John B., 1977. "Efficient portfolio choice with differential taxation of dividends and capital gains," Journal of Financial Economics, Elsevier, vol. 5(1), pages 25-53, August.
  57. Jennifer L. Blouin & Jana Smith Raedy & Douglas A. Shackelford, 2000. "Capital Gains Holding Periods and Equity Trading: Evidence from the 1998 Tax Act," NBER Working Papers 7827, National Bureau of Economic Research, Inc.
  58. Joel Slemrod, 1982. "Stock Transactions Volume and the 1978 Capital Gains Tax Reduction," Public Finance Review, SAGE Publishing, vol. 10(1), pages 3-16, January.
  59. Protopapadakis, Aris, 1983. "Some Indirect Evidence on Effective Capital Gains Tax Rates," The Journal of Business, University of Chicago Press, vol. 56(2), pages 127-38, April.
  60. Hubbard, Robert Glenn, 1985. "Personal Taxation, Pension Wealth, and Portfolio Composition," The Review of Economics and Statistics, MIT Press, vol. 67(1), pages 53-60, February.
  61. 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.
  62. Klein, Peter, 1999. "The capital gain lock-in effect and equilibrium returns," Journal of Public Economics, Elsevier, vol. 71(3), pages 355-378, March.
  63. Maki, Dean M., 1996. "Portfolio Shuffling and Tax Reform," National Tax Journal, National Tax Association, vol. 49(3), pages 317-29, September.
  64. McDonald, Robert L., 1983. "Government debt and private leverage : An extension of the Miller theorem," Journal of Public Economics, Elsevier, vol. 22(3), pages 303-325, December.
  65. Kaplow, Louis, 1994. "Taxation and Risk Taking: A General Equilibrium Perspective," National Tax Journal, National Tax Association, vol. 47(4), pages 789-98, December.
  66. Heckman, James J, 1976. "A Life-Cycle Model of Earnings, Learning, and Consumption," Journal of Political Economy, University of Chicago Press, vol. 84(4), pages S11-44, August.
  67. Irwin Tepper, 1981. "Taxation and Corporate Pension Policy," NBER Working Papers 0661, National Bureau of Economic Research, Inc.
  68. Landsman, Wayne R. & Shackelford, Douglas A. & Yetman, Robert J., 2002. "The determinants of capital gains tax compliance: evidence from the RJR Nabisco leveraged buyout," Journal of Public Economics, Elsevier, vol. 84(1), pages 47-74, April.
  69. Terrance Odean, 1998. "Are Investors Reluctant to Realize Their Losses?," Journal of Finance, American Finance Association, vol. 53(5), pages 1775-1798, October.
  70. John B. Shoven, 1999. "The Location and Allocation of Assets in Pension and Conventional Savings Accounts," NBER Working Papers 7007, National Bureau of Economic Research, Inc.
  71. Joulfaian, David, 1991. "Charitable Bequests and Estate Taxes," National Tax Journal, National Tax Association, vol. 44(2), pages 169-80, June.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:8340. 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: ()

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 references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link 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 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.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.