Tax Arbitrage with Risk and Effort Aversion -- Swedish Lottery Bonds 1970-1990

Kristian Rydqvist

No 7767, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: Swedish lottery bonds are valuable tax shelters before the tax reform of 1991. By trading around the coupon lottery, high-tax investors with capital gains from the stock market shift their tax liability to low-tax investors. The uncertainty of the coupon lottery and the effort of verifying the winning lottery bond numbers are a nuisance to tax traders. We investigate how the Treasury (issuer), market makers (banks), and lottery bond investors respond to those frictions.

Keywords: Ex-dividend day; Lottery number checking; Rationing; Tax arbitrage; Turn-of-the-year effect; Underpricing (search for similar items in EconPapers)
JEL-codes: G12 G18 (search for similar items in EconPapers)
Date: 2010-03
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