Tax-Loss Trading and Wash Sales

Grinblatt, Mark; Keloharju, Matti

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Tax-Loss Trading and Wash Sales

NBER Working Paper No. w8745

38 Pages Posted: 24 Jan 2002 Last revised: 29 Nov 2022

See all articles by Mark Grinblatt

Mark Grinblatt

University of California, Los Angeles (UCLA) - Finance Area; Yale University - International Center for Finance; National Bureau of Economic Research (NBER)

Matti Keloharju

Aalto University - School of Business; Research Institute of Industrial Economics (IFN); Centre for Economic Policy Research (CEPR)

There are 2 versions of this paper

Date Written: January 2002

Abstract

An analysis of trades in the Finnish stock market around the turn of the year shows that Finnish investors tend to realize losses more than gains towards the end of December. They also buy back the same stocks they recently sold, with a repurchase rate that depends on the size of the capital loss and how close the sale is to the end of December. The resulting net buying pressure from these 'wash sale' repurchases is greater for stocks with small market capitalizations and has a calendar pattern that is similar to that of stock returns.

Suggested Citation: Suggested Citation

Grinblatt, Mark and Keloharju, Matti, Tax-Loss Trading and Wash Sales (January 2002). NBER Working Paper No. w8745, Available at SSRN: https://ssrn.com/abstract=298269