How Do Taxes Affect Investors’ Stock Market Realizations?
Evidence from Tax-Return Panel Data
DOI:
https://doi.org/10.1016/1057-0810(95)90045-4Abstract
This article provides direct evidence on the empirical importance of tax-reduction strategies. Our results indicate that relatively few investors trade securities to reduce their taxes and that tax-induced trading has little effect on stock prices. Our findings suggest that, holding all else constant, stock prices are likely to be insensitive to the difference between short- and long-term capital gains tax rates. The Journal of Business, April 1994, 67(2): 231-262. (Reprinted with permission of The Journal of Business.)
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