Information, Capital Gains Taxes & New York Stock Exchange
We present evidence regarding the response of stock prices in the New York Stock Exchange to news about capital gains taxes. If information about an upcoming event becomes available, then it should be reflected in prices as soon as the news about it arrives. In the 1980 – 2003 period there are 2383 newspapers articles that address upcoming changes in capital gains taxes. From these articles, we construct two indicator functions to represent information. One that corresponds to news about the upcoming decreases in taxes and the other increases in taxes. Our results indicate that information regarding the event is significant in explaining firm returns.
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