An Empirical Examination of Tax Factors and Mutual Funds' Stock Sales Decisions

Huddart, Steven J.; Narayanan, V. G.

doi:10.2139/ssrn.296420

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An Empirical Examination of Tax Factors and Mutual Funds' Stock Sales Decisions

Review of Accounting Studies, Forthcoming

52 Pages Posted: 21 Jan 2002

See all articles by Steven J. Huddart

Steven J. Huddart

Pennsylvania State University, University Park - Department of Accounting

V. G. Narayanan

Harvard University - Accounting & Control Unit

There are 3 versions of this paper

Abstract

We examine whether taxes affect stock sales by mutual funds. For certain funds, the expected amount of a given stock sold in a given quarter is 62% greater when liquidation would trigger a capital loss equal to 1% of the value of the portfolio than when a like-size gain would be triggered, a greater effect than is associated with either contemporaneous excess stock returns of 50% or unexpected EPS equal to 50% of the stock price. For growth funds, responses to tax factors are consistent from year to year, and dispositions vary with the year-to-date realized gain.

Keywords: Investment advisers; Overhang; Realized; Unrealized

JEL Classification: H20, G23

Suggested Citation: Suggested Citation

Huddart, Steven J. and Narayanan, V. G., An Empirical Examination of Tax Factors and Mutual Funds' Stock Sales Decisions. Review of Accounting Studies, Forthcoming, Available at SSRN: https://ssrn.com/abstract=296420 or http://dx.doi.org/10.2139/ssrn.296420