Work

Stock Return Seasonalities and the Tax-Loss Selling Hypothesis: Analysis of the Arguments and Australian Evidence

Year: 1983

Type: article

Abstract: A ‘tax-loss selling’ hypothesis has frequently been advanced to explain the ‘January effect’ reported in this issue by Keim. This paper concludes that U.S. tax laws do not unambiguously predict such an effect. Since Australia has similar tax laws but a July–June tax year, the hypothesis predicts a small-firm July premium. Australian returns show pronounced December–January and July–August seasonals, and a premium for the smallest-firm decile of about four percent per month across all months. This contrasts with the U.S. data in which the small-firm premium is concentrated in January. We conclude that the relation between the U.S. tax year and the January seasonal may be more correlation than causation.

Source: ScholarlyCommons (University of Pennsylvania)

Authors: Brown, Philip, Keim, Donald B., Kleidon, Allan W., Marsh, Terry A.

Institutions: The University of Western Australia, University of Pennsylvania, Stanford University, Massachusetts Institute of Technology

Language: English

Topic: Financial Markets and Investment Strategies

Subfield: Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

Open Access status: green

OpenAlex ID: W1514711244

FWCI: 22.87

Cites: 13

Cited by: 319

Related to: 10