Asymmetric tax-induced trading: The effect of capital gains tax changes
Anna Agapova and
Nikanor Volkov
The Quarterly Review of Economics and Finance, 2021, vol. 79, issue C, 245-259
Abstract:
We examine the effect of confirmed and tentative changes in long-term capital gains tax rates on direction and magnitude of tax-induced trading. Results show that investors have an asymmetric response to tax rate changes. For all tax events, investors adjust trading in losers more than in winners. Between tax events, investors respond more to a tax rate decrease than to a tax rate increase for both losing and winning stocks. Tax-induced trading activity shows that investors do not differentiate between unconfirmed and confirmed tax rate increases. Uncertainty about an impending tax rate change alters investors’ trading behavior and may affect government tax collections.
Keywords: Capital gains taxes; Tax changes; Trading strategies (search for similar items in EconPapers)
JEL-codes: G02 G10 G18 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)
Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S106297692030079X
Full text for ScienceDirect subscribers only
Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:eee:quaeco:v:79:y:2021:i:c:p:245-259
DOI: 10.1016/j.qref.2020.06.005
Access Statistics for this article
The Quarterly Review of Economics and Finance is currently edited by R. J. Arnould and J. E. Finnerty
More articles in The Quarterly Review of Economics and Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().