The Individual’s Tax-Exempt Bond Portfolio Decision Under Income Uncertainty

Authors

  • Amy v. Puelz Department of Management Information Sciences, Edwin L. Cox School of Business, Southern Methodist University, Dallas, Texas, 75275.

DOI:

https://doi.org/10.1016/1057-0810(93)90006-C

Abstract

In this article, an individual’s tax-exempt bond porrfolio decision is investigated. A model capturing the relationship between income uncertainty and optimal portfolio choice is defined when an individual decision-maker has the opportunity to hold higher yielding private-activity bonds. The findings in this article show that in most cases risk-averse individuals will maximize the expected utility of after-tax income by holding a large proportion of private-activity bonds in their portfolio even under income uncertainty and the risk of a minimum tax liability. Those individuals who would benefit from holding private-activity bonds in a tax-exempt portfolio are identified and the magnitude of the benefit is quantified,

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Published

1993-12-30

How to Cite

Puelz, A. v. (1993). The Individual’s Tax-Exempt Bond Portfolio Decision Under Income Uncertainty. Financial Services Review, 3(1), 59–73. https://doi.org/10.1016/1057-0810(93)90006-C

Issue

Vol. 3 No. 1 (1993): Financial Services Review

Section

New Original Submission

License

Copyright (c) 1993 JAI Press Inc.

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