Optimal Stock Trading with Personal Taxes: Implications for Prices and the Abnormal January Returns

摘要: The tax law confers upon the investor a timing option--to realize capital losses and defer gains. With rate on long term gains being about half short rate, provides second term, if at all. Our theory simulation with actual stock prices over 1962-1977 period establish that option is extremely valuable: Taxable investors should their in high variance stocks repurchase same or similar stock, order to reestablish short-term status potential future term.Tax trading does not explain positive abnormal returns of small firms. In presence transactions costs, predicts volumeof tax-loss selling increases from January December ceases inthe first few days January. volume seasonal maps into stockprice only sellers are assumed irrational ignorant price seasonality.