Tax Induced Trading: The Effect of the 1986 Tax Reform Act on Stock Market Activity / Paul J. Bolster, Lawrence B. Lindsey, Andrew W. Mitrusi.

Format:

Book

Author/Creator:

Bolster, Paul J.

Contributor:

National Bureau of Economic Research.

Lindsey, Lawrence B.

Mitrusi, Andrew W.

Series:

Working Paper Series (National Bureau of Economic Research) no. w2659.

NBER working paper series no. w2659

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

Tax Induced Trading

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1988.

Summary:

The abolition of the favorable tax treatment of long term capital gains forced investors to reassess traditional year-end trading strategies used to manage tax liabilities. This study compares with year-end trading behavior in previous years with that observed at the end of 1986. Traditional strategies involve selling both short and long term losers and holding short and long term winners. Our results affirm previous findings concerning tax induced trading at year end. However, for 1986, we find that the anticipated tax code changes had a powerful effect on trading behavior. Compared to previous years, relative trading volume was considerably higher in December of 1986 for long term winners and lower for long term losers. Additional results indicate that traditional patterns of trading induced by short term capital gains and losses were also altered substantially in 1986.

Notes:

Print version record

July 1988.