Personal Taxes in Multiperiod Valuation Models (Persönliche Steuern Im Mehrperiodenkontext)
FinanzBetrieb, Vol. 2, pp. 108-116, 2007
19 Pages Posted: 28 Sep 2006 Last revised: 31 Mar 2009
Date Written: September 25, 2006
In a recent contribution Jorg Wiese discusses the problem of how to adopt a version of the single-period Tax-CAPM of Brennan (1970) for multiperiod valuation problems. With this short note, we would like to demonstrate the following problems of Wiese's analysis:
(1) the valuation calculus proposed by Wiese does not account for capital gains taxes in period T,
(2) if capital gains are consistently considered in each period, then there exists a period-independent relation between the certainty equivalent and the risk premium approach, and
(3) Wiese's claim that valuation results are insensitive with respect to assumptions concerning the timing of capital gains taxes [as long as tax deferral effects are reinvested at the (perfect) capital market] does not hold for positive interest rates.
Note: Downloadable document is in German.
Keywords: CAPM, personal taxes
JEL Classification: G31
Suggested Citation: Suggested Citation