Northeastern University and Purdue University, respectively. Portions of the research reported herein were supported by the National Bureau of Economic Research and by a grant from the National Science Foundation. Helpful discussions with Gordon Wright are gratefully acknowledged as well. The authors, however, bear responsibility for the analysis and conclusions.
Evidence on Tax-Motivated Securities Trading Behavior
Article first published online: 30 APR 2012
1991 The American Finance Association
The Journal of Finance
Volume 46, Issue 1, pages 369–382, March 1991
How to Cite
BADRINATH, S. G. and LEWELLEN, W. G. (1991), Evidence on Tax-Motivated Securities Trading Behavior. The Journal of Finance, 46: 369–382. doi: 10.1111/j.1540-6261.1991.tb03755.x
- Issue published online: 30 APR 2012
- Article first published online: 30 APR 2012
Tax-loss selling by investors in common stocks near the end of calendar years has been proposed as an explanation for the turn-of-the-year effect in stock returns. Past analyses of this hypothesis have relied on inferential data. We provide here some direct data from a compilation of over 80,000 actual common stock investment round trips by a sample of 3000 individual investors. We find strong evidence of a concentration of loss-taking trades late in the year and milder evidence of a concentration just prior to the dates when investments become eligible for long-term tax treatment.