Tax Changes and Asset Pricing: Time-Series Evidence

Sialm, Clemens

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Tax Changes and Asset Pricing: Time-Series Evidence

NBER Working Paper No. w11756

55 Pages Posted: 22 Jan 2006 Last revised: 17 Aug 2022

See all articles by Clemens Sialm

Clemens Sialm

University of Texas at Austin - McCombs School of Business; National Bureau of Economic Research (NBER)

There are 2 versions of this paper

Date Written: November 2005

Abstract

The effective tax rate on equity securities has fluctuated considerably in the U.S. between 1917-2004. This study investigates whether personal taxes on equity securities are related to stock valuations using the time-series variation in tax burdens. The paper finds an economically and statistically significant relationship between asset valuations and personal tax rates. Consistent with tax capitalization, stock valuations tend to be relatively low when tax burdens are relatively high.

Suggested Citation: Suggested Citation

Sialm, Clemens, Tax Changes and Asset Pricing: Time-Series Evidence (November 2005). NBER Working Paper No. w11756, Available at SSRN: https://ssrn.com/abstract=847028