Tax-Loss Trading and Wash Sales

41 Pages Posted: 22 Aug 2000

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)

Multiple version iconThere are 2 versions of this paper

Date Written: July 2002

Abstract

An analysis of Finnish investors' stock trades shows that they realize losses more than gains towards the end of December. Moreover, they repurchase the same stocks recently sold. The repurchase rate depends on loss magnitude, firm size, and how late in the year the sale takes place. This trading pattern generates net tax-loss buying pressure that is negative prior to the turn of the year and positive afterwards. Cross-sectional regressions indicate that stock returns around the turn of the year, particularly for small firms, are related to net tax-loss buying pressure but not to firm size per se.

JEL Classification: G10

Suggested Citation

Grinblatt, Mark and Keloharju, Matti, Tax-Loss Trading and Wash Sales (July 2002). Yale ICF Working Paper No. 00-15; Yale SOM Working Paper No. ICF - 00-15. Available at SSRN: https://ssrn.com/abstract=230935 or http://dx.doi.org/10.2139/ssrn.230935

Mark Grinblatt (Contact Author)

University of California, Los Angeles (UCLA) - Finance Area ( email )

Los Angeles, CA 90095-1481
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Yale University - International Center for Finance

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National Bureau of Economic Research (NBER)

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Matti Keloharju

Aalto University - School of Business ( email )

P.O. Box 21210
AALTO, FI-00076
Finland
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Research Institute of Industrial Economics (IFN) ( email )

Box 55665
Grevgatan 34, 2nd floor
Stockholm, SE-102 15
Sweden

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

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