Investor Behaviour in Response to Australia’s Capital Gains Tax
26 Pages Posted: 8 Nov 2010
We calibrate the effect of Australia’s Capital Gains Tax (CGT) on share prices and market activity. Based on a large sample drawn from all listed Australian companies for the years 1994–2007, we find significant tax-loss selling (TLS) of shares that lost value over the financial year, which is reflected in unusually high trading volume and more sell orders in June and a rebound in July. There is some evidence that small mining stocks are particular targets for TLS. Interestingly, the 1999 CGT reforms, which introduced concessions for long-term capital gains, did not reduce the incidence of TLS.
Suggested Citation: Suggested Citation