Inflation, Tax Rules, and the Stock Market
47 Pages Posted: 28 May 2004 Last revised: 10 Aug 2010
Date Written: November 1979
This paper shows how the interaction of tax rules and expected inflation can decrease substantially the share price per dollar of pretax earnings. The current analysis extends my earlier study [Feldstein (1978)] by recognizing corporate debt, retained earnings, and the role of diverse shareholder investments. As before, the analysis separates household and institutional investors.
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