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Published September 1994 | public
Journal Article

Tax-Induced lntertemporal Restrictions on Security Returns

Abstract

This article derives testable restrictions on equilibrium asset prices when investors have the option to time the realization of their capital gains and losses for tax purposes. The tax-timing option alters both the magnitude and timing of equity returns relative to those in a tax-free model. The tax-induced restrictions are empirically examined, and the tax rates and preference parameters are estimated. While the tax-free model can be rejected in favor of the tax-based model as the specified alternative, the tax-based model is still unable to adequately explain cross-sectional differences in asset returns.

Additional Information

© 1994 the American Finance Association.

Additional details

Created:
August 20, 2023
Modified:
October 17, 2023