A note on capital asset pricing and heterogeneous taxes

Hans Marius Eikseth and Snorre Lindset

Journal of Banking & Finance, 2009, vol. 33, issue 3, 573-577

Abstract: In this paper, we present a stylized model where we show how asset prices, i.e., required expected rates of returns, may be characterized in a world with heterogeneous asset taxes. Within a simple CAPM-like framework, we derive an after-tax beta equal to the pre-tax beta multiplied by a (non-obvious) asset specific tax adjustment. We further show in what sense the Security Market Line here can be replaced by a Security Market Fan. Well-known CAPM relations are obtained as special cases, and policy implications are analyzed.

Keywords: Cost; of; capital; Heterogeneous; taxes; CAPM; After-tax; beta (search for similar items in EconPapers)
Date: 2009
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Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:33:y:2009:i:3:p:573-577

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