Asset pricing under tax rate uncertainty

This thesis contributes to explaining the effects of tax rate uncertainty on asset pricing. It uses real business cycle models with and without endogenous investments to conduct numerical experiments assuming different stochastic processes for the tax rate on dividends. It turns out that taxes on dividends can partly explain the equity premium. However, the magnitude of the effect of tax rate uncertainty on asset pricing depends very much on modelling assumptions such as endogeneity of investments. Furthermore, effects through tax capitalization and tax redistribution have substantial effects on asset prices and expected returns