Work

Tax‐Induced Trading: The Effect of the 1986 Tax Reform Act on Stock Market Activity

Year: 1989

Type: article

Abstract: ABSTRACT The end of favorable tax treatment for long‐term capital gains caused investors to reassess traditional tax‐induced trading strategies. This study compares trading behavior in December 1986 and January 1987 with previous years. Our results indicate that these tax code changes had a powerful effect on trading behavior. Relative trading volume was considerably higher in December 1986 for long‐term winners but not significantly lower for long‐term losers. Results also indicate altered trading patterns based on short‐term gains in December 1986 and for long‐term winners in January 1987.

Source: The Journal of Finance

DOI: 10.1111/j.1540-6261.1989.tb05060.x

Authors: PAUL J. BOLSTER, LAWRENCE B. LINDSEY, ANDREW MITRUSI

Institutions: National Bureau of Economic Research, Harvard University

Language: English

Topic: Financial Markets and Investment Strategies

Subfield: Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

Open Access status: green

OpenAlex ID: W2060168545

FWCI: 8.772

Cites: 16

Cited by: 34

Related to: 10