Investment Taxes and Equity Returns
Clemens Sialm
No 12146, NBER Working Papers from National Bureau of Economic Research, Inc
Abstract:
This paper investigates whether investors are compensated for the tax burden of equity securities. Effective tax rates on equity securities vary due to frequent tax reforms and due to persistent differences in propensities to pay dividends. The paper finds an economically and statistically significant relationship between risk-adjusted stock returns and effective personal tax rates using a new data set covering tax burdens on a cross-section of equity securities between 1927 and 2004. Consistent with tax capitalization, stocks facing higher effective tax rates tend to compensate taxable investors by generating higher before-tax returns.
JEL-codes: E44 G12 H20 (search for similar items in EconPapers)
Date: 2006-04
New Economics Papers: this item is included in nep-cfn, nep-fin, nep-fmk, nep-mac, nep-pbe and nep-pub
Note: AP CF PE
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Citations: View citations in EconPapers (3)
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Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:12146
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