Tax Changes and Asset Pricing

55 Pages Posted: 29 Nov 2003 Last revised: 7 Jul 2008

See all articles by Clemens Sialm

Clemens Sialm

University of Texas at Austin - McCombs School of Business; National Bureau of Economic Research (NBER); AQR Capital Management, LLC

Multiple version iconThere are 2 versions of this paper

Date Written: June 30, 2008


This paper investigates whether investors were compensated for the tax burden of equity securities over the time period between 1913 and 2006. Effective tax rates on equity securities vary over time due to changes in tax rates on dividends and capital gains and due to changes in corporate payout policies. Effective tax rates also vary cross-sectionally due to persistent differences in propensities to pay dividends, which tend to be taxed more heavily than capital gains. The results indicate an economically plausible and statistically significant tax capitalization over time and cross-sectionally.

Keywords: Tax Capitalization, Stock Returns, Stock Valuations

JEL Classification: G12, H20, E44

Suggested Citation

Sialm, Clemens, Tax Changes and Asset Pricing (June 30, 2008). AFA 2004 San Diego Meetings. Available at SSRN: or

Clemens Sialm (Contact Author)

University of Texas at Austin - McCombs School of Business ( email )

Austin, TX 78712
United States


National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

AQR Capital Management, LLC ( email )

Greenwich, CT
United States

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