Tax-Motivated Trading by Individual Investors

We analyze stock trades made by individuals holding stock in both taxable and tax-deferred accounts. By comparing trades across these two types of accounts, we uncover a capital gains lock-in effect in taxable accounts. The lock-in effect is more pronounced for large stock transactions and for stock...

Full description

Saved in:
Bibliographic Details
Published in:The American economic review 2005-12, Vol.95 (5), p.1605-1630
Main Authors: Ivković, Zoran, Poterba, James, Weisbenner, Scott
Format: Article
Language:English
Subjects:
Capital gains
Capital gains taxes
Capital losses
Capital tax
Data analysis
Datasets
Decision making
Economic behaviour
Empirical tests
Estimated taxes
Estimates
Financial economics
Financial models
Financial research
Impact analysis
Income taxes
Investment policy
Investments
Investor behavior
Investors
Portfolio management
Probability
Sales taxes
Securities trading
Stock exchange
Stock prices
Stock purchases
Stock sales
Stockbrokers
Stocks
Studies
Tax incentives
Tax increases
Tax planning
Tax rates
Tax returns
Taxation
Trade
U.S.A
Citations: Items that this one cites
Items that cite this one
Online Access:Get full text
Tags: Add Tag
No Tags, Be the first to tag this record!
Description
Summary:We analyze stock trades made by individuals holding stock in both taxable and tax-deferred accounts. By comparing trades across these two types of accounts, we uncover a capital gains lock-in effect in taxable accounts. The lock-in effect is more pronounced for large stock transactions and for stocks held for at least 12 months. Over shorter horizons, the disposition effect outweighs the lock-in effect. Comparison of loss realizations in taxable and tax-deferred accounts yields evidence of tax-loss selling throughout the year. Effective accrual tax rates for stocks that experience substantial appreciation are substantially below the statutory tax rate on long-term gains.
ISSN:0002-8282
1944-7981
DOI:10.1257/000282805775014461