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Tax clientele effects in the German bond market


  • Stehle, Richard
  • Jaschke, Stefan R.
  • Wernicke, S.


This paper presents an analysis of tax clientele eects in the German government bond market from the viewpoint of private investors. The methods developed here allow the identification of bonds that are over-valued from the viewpoint of a certain tax class, the estimation of tax-specific term structures, and the identification of representative investors. Regression and no-arbitrage approaches are unified. The empirical results presented have important implications for the estimation of the term structure from coupon bond prices and the valuation of interest rate derivatives.

Suggested Citation

  • Stehle, Richard & Jaschke, Stefan R. & Wernicke, S., 1998. "Tax clientele effects in the German bond market," SFB 373 Discussion Papers 1998,11, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
  • Handle: RePEc:zbw:sfb373:199811

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    References listed on IDEAS

    1. Tomas Björk & Yuri Kabanov & Wolfgang Runggaldier, 1997. "Bond Market Structure in the Presence of Marked Point Processes," Mathematical Finance, Wiley Blackwell, vol. 7(2), pages 211-239.
    2. David Heath & Robert Jarrow & Andrew Morton, 2008. "Bond Pricing And The Term Structure Of Interest Rates: A New Methodology For Contingent Claims Valuation," World Scientific Book Chapters,in: Financial Derivatives Pricing Selected Works of Robert Jarrow, chapter 13, pages 277-305 World Scientific Publishing Co. Pte. Ltd..
    3. George M. CONSTANTINIDES & Jonathan E. INGERSOLL Jr., 2005. "Optimal Bond Trading With Personal Taxes," World Scientific Book Chapters,in: Theory Of Valuation, chapter 6, pages 165-206 World Scientific Publishing Co. Pte. Ltd..
    4. Jaime Cuevas Dermody & R. Tyrrell Rockafellar, 1991. "Cash Stream Valuation In the Face of Transaction Costs and Taxes," Mathematical Finance, Wiley Blackwell, vol. 1(1), pages 31-54.
    5. Schaefer, Stephen M., 1982. "Tax-induced clientele effects in the market for British government securities : Placing bounds on security values in an incomplete market," Journal of Financial Economics, Elsevier, vol. 10(2), pages 121-159, July.
    6. Jaime Cuevas Dermody & R. Tyrrell Rockafellar, 1995. "Tax Basis And Nonlinearity In Cash Stream Valuation," Mathematical Finance, Wiley Blackwell, vol. 5(2), pages 97-119.
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    More about this item


    linear programming; duality theory; term structure of interest rates; smoothing splines; tax clientele; arbitrage bounds;

    JEL classification:

    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis


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