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Capital Gains Tax Rules, Tax-loss Trading, and Turn-of-the-year Returns
Article first published online: 17 DEC 2002
DOI: 10.1111/0022-1082.00328
The American Finance Association 2001
1540-6261/asset/cover.gif?v=1&s=5192ce61b1e4bde927ebc2df55b44b4da55ef137 "The Journal of Finance")
Additional Information
How to Cite
Poterba, J. M. and Weisbenner, S. J. (2001), Capital Gains Tax Rules, Tax-loss Trading, and Turn-of-the-year Returns. The Journal of Finance, 56: 353–368. doi: 10.1111/0022-1082.00328
Publication History
- Issue published online: 17 DEC 2002
- Article first published online: 17 DEC 2002
- Abstract
- Cited By
Changes in the capital gains tax rules facing individual investors do not affect the incentives for “window dressing” by institutional investors, but they can affect the incentives for year-end tax-induced trading by individual investors. Empirical evidence for the 1963 to 1996 period suggests that when the tax law encouraged taxable investors who accrued losses early in the year to realize their losses before year-end, the correlation between early year losses and turn-of-the-year returns was weaker than when the law did not provide such an early realization incentive. These findings suggest that tax-loss trading contributes to turn-of-the-year return patterns.