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Tax Changes and Asset Pricing
Clemens Sialm University of Texas at Austin - McCombs School of Business; National Bureau of Economic Research (NBER) June 30, 2008 AFA 2004 San Diego Meetings Abstract: This paper investigates whether investors were compensated for the tax burden of equity securities over the time period between 1913 and 2006. Effective tax rates on equity securities vary over time due to changes in tax rates on dividends and capital gains and due to changes in corporate payout policies. Effective tax rates also vary cross-sectionally due to persistent differences in propensities to pay dividends, which tend to be taxed more heavily than capital gains. The results indicate an economically plausible and statistically significant tax capitalization over time and cross-sectionally.
Keywords: Tax Capitalization, Stock Returns, Stock Valuations JEL Classifications: G12, H20, E44 Working Paper SeriesDate posted: November 29, 2003 ; Last revised: July 07, 2008Suggested CitationContact Information
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