Tax Effects on the Pricing of Australian Stock Index Futures
29 Pages Posted: 23 Nov 2011
Date Written: December 2008
This paper estimates the impact of the debt tax shield, cash dividends and imputation tax credits on the prices of Australian stock index futures. Relative to futures payoffs, the cost of financing the set of shares of the underlying index provides a mild tax shield, cash dividends are incompletely valued and imputation credits are worth at least fifty percent of their face value. The values that investors place on cash dividends and tax credits implied by index futures prices are close to those estimated in ex-dividend date stock price drop-off studies of the Australian share market.
Keywords: Stock index futures, Debt tax shield, Dividend valuation, Imputation credit
JEL Classification: G12, G13
Suggested Citation: Suggested Citation