Journal of Finance Vol. 44 No. 2 1989
Tax-Induced Trading: The Effect of the 1986 Tax Reform Act on Stock Market Activity
Abstract
The end of favorable tax treatment for long-term capital gains caused investors to reassess traditional tax-induced trading strategies. This study compares trading behavior in December 1986 and January 1987 with previous years. Our results indicate that these tax code changes had a powerful effect on trading behavior. Relative trading volume was considerably higher in December 1986 for long-term winners but not significantly lower for long-term losers. Results also indicate altered trading patterns based on short-term gains in December 1986 and for long-term winners in January 1987.
- DOI
- 10.2307/2328593
- Volume
- 44
- Issue
- 2
- Pages
- 327
- Sources
- openalex crossref