Tax-Loss Selling and the Year-End Behavior of Dow Jones Stocks | Zendy

Max Gold | Zendy; Jeff Levere | Zendy; Gary Smith | Zendy

AI Assistant Blog Pricing

Home ZAIA Blog

Open Access

Tax-Loss Selling and the Year-End Behavior of Dow Jones Stocks

Author(s) -

Max Gold,

Jeff Levere,

Gary Smith

Publication year - 2012

Publication title -

accounting and finance research

Language(s) - English

Resource type - Journals

eISSN - 1927-5994

pISSN - 1927-5986

DOI - 10.5430/afr.v2n1p40

Subject(s) - market liquidity , economics , monetary economics , incentive , asset (computer security) , capital gains tax , finance , microeconomics , double taxation , ad valorem tax , computer security , computer science

A capital gain or loss only has tax consequences if the asset is sold. This tax rule creates an incentive for realizing losses but not gains. If investors implement this tax-harvesting strategy, there should be a surge in the year-end sales of stocks whose prices have declined during the year, and additional downward pressure on their prices. Previous studies have found evidence of volume and price effects, particularly for small stocks. In contrast, our analysis of the components of the Dow Jones Industrial Average finds abnormally high December volume for depressed stocks, but little or no effect on prices—evidently because of their liquidity.

The content you want is available to Zendy users.

Already have an account? Click here to sign in.

Having issues? You can contact us here

Accelerating Research