Download or read book Portfolio Selection with Multiple Assets and Capital Gains Taxes written by Lorenzo Garlappi and published by . This book was released on 2001 with total page 54 pages. Available in PDF, EPUB and Kindle. Book excerpt: We analyze the portfolio choice of an investor who can invest in tow risky assets (in addition to a riskless asset) and who is subject to taxes on realized capital gains. These taxes appear in the portfolio choice problem as a form of time-independent, endogenous transaction costs. Similar to the case of portfolio choice with transaction costs, the optimal strategy of the taxable investor contains a quot;no tradequot; region originating from the excercise of the option to defer capital gains taxes. This may lead an investor to hold a markedly undiversified portfolio, for reasonable parameter values. With multiple risky assets the investor is effectively holding a portfolio of tax-deferral options. The value of these options is considerable, in the range of 5-10% of the wealth of an investor with constant relative risk aversion. Such value is decreasing in the volatility and correlation of the assets and in the risk aversion. If the risky assets can be held only through a mutual fund, the investor incurs a cost due to the loss of flexibility whose magnitude is small when assets re positively correlated but can increase considerably as the correlation decreases.

Download or read book Taxation and Portfolio Structure written by James M. Poterba and published by . This book was released on 2001 with total page 68 pages. Available in PDF, EPUB and Kindle. Book excerpt: Overview of how taxation affects household portfolio structure. It begins by outlining six aspects of portfolio behavior that may be influenced by the tax system. These are asset selection, asset allocation, borrowing, asset location in taxable and tax-deferred accounts, asset turnover, and whether to hold assets directly or through financial intermediaries. The analysis considers how ignoring tax considerations may bias estimates of how other variables, such as income or net worth, affect the structure of household portfolios. The paper then describes the tax rules that apply to various portfolio instruments in a range of major industrialized nations. This illustrates the wide variation in the potential impact of tax rules on portfolio choice. Finally, the paper selectively reviews the existing evidence on how taxation affects portfolio choice. A small but growing literature, primarily based on the analysis of U.S. data, suggests that taxes have important effects on several aspects of portfolio choice. There remain a number of decisions, however, for which it appears difficult to reconcile household choices with tax-efficient behavior.

Download or read book Taxation Risk and Portfolio Choice written by John R. Brooks and published by . This book was released on 2013 with total page 51 pages. Available in PDF, EPUB and Kindle. Book excerpt: Many articles in the legal and economic literature claim that a pure Haig-Simons income tax cannot effectively tax investment income. This is because an investor can use leverage to gross up her investments in risky assets such that the increased gain (or loss) exactly offsets any income tax (or deduction) on the returns to risk-taking. This article argues, however, that while it is possible for an investor to make such portfolio shifts, she almost certainly will not because of the increased risk of doing so.Central to any discussion of the effects of taxation on investment risk-taking is the meaning of risk itself. The central claim of this article is that a better conception of investment risk is the risk of loss and not merely the variance of returns. Applying this notion of risk -- one that is well supported in the finance literature but new to the taxation-and-risk literature -- to an investor's portfolio choice question shows that an investor will not increase her investment in risky assets by enough to offset the tax. As a result, there is an effective tax on investment risk-taking under a normative income tax.

Download or read book Wealth Accumulation and Portfolio Choice with Taxable and Tax deferred Accounts written by Francisco J. Gomes and published by . This book was released on 2005 with total page 60 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book The Effect of Taxes on Portfolio Choice written by Jon Bakija and published by . This book was released on 2000 with total page 69 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Taxes and Portfolio Choice written by Mihir Arvind Desai and published by . This book was released on 2007 with total page 24 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper investigates how taxes influence portfolio choices by exploring the response to the distinctive treatment of foreign dividends in the Jobs and Growth Tax Relief Reconciliation Act (JGTRRA). JGTRRA lowered the dividend tax rate to 15% for American equities and extended this tax relief only to foreign corporations from a subset of countries. This paper uses a difference-in-difference analysis that compares US equity holdings in affected and unaffected countries. The international investment responses to JGTRRA were substantial and imply an elasticity of asset holdings with respect to taxes of -1.6. This effect cannot be explained by several potential alternative hypotheses, including differential changes to the preferences of American investors, differential changes in investment opportunities, differential time trends in investment or changed tax evasion behavior.

Download or read book A General Equilibrium Model of Housing Taxes and Portfolio Choice written by James Berkovec and published by . This book was released on 1990 with total page 68 pages. Available in PDF, EPUB and Kindle. Book excerpt: We describe a model in which rental and owner housing are risky assets, tenure choice is endogenous, and each household is constrained to consume the same amount of owner housing as it has in its investment portfolio. At each iteration in the search for an equilibrium, we determine the new taxable income for each of 3,578 households (from the Survey of Consumer Finances), and we use statutory schedules to find the marginal rate and tax paid. Equilibrium net rates of return are major determinants of the amount of owner housing, but a logit model indicates that demographic factors are the main determinants of ownership rates. A simulation of taxes on owner housing raises welfare not only by re-allocating capital, but also because government takes part of the risk from individual properties and diversifies it away. Measures to disallow property tax or mortgage interest deductions do not help share this risk. Simulations of actual tax reform indicate a small shift from rental to owner housing, and welfare gains from re-allocating risk.

Download or read book New Evidence on Taxes and Portfolio Choice written by and published by . This book was released on 2009 with total page 43 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Personal Taxation Portfolio Choice and the Effect of the Corporation Income Tax written by Martin S. Feldstein and published by . This book was released on 1978 with total page 23 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Portfolio Choice and Transactions Taxes written by Markus Haberer and published by . This book was released on 2004 with total page 25 pages. Available in PDF, EPUB and Kindle. Book excerpt: In a simple portfolio choice model of two assets, a foreign exchange transactions tax is implemented. We show that the graph in the mu-sigma(2)-range is still a parabola and delineate its characteristics for altering tax rates. We presumed a risk avers investor seeking to minimize investment risks by international diversification of two uncorrelated assets. The main finding is that setting up a portfolio under the new tax condition leads to a higher transaction volume on international financial markets. In contrast, the transactions tax has got a stabilizing character when adjusting the portfolio to increased foreign investment risks.

Download or read book Personal Taxation Portfolio Choice and the Effect of the Corporate Income Tax written by Martin S. Feldstein and published by . This book was released on 1978 with total page 23 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Taxation Portfolio Choice and Debt Equity Ratios written by and published by . This book was released on 1984 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper explores the portfolio behavior of investors differing with respect to both tax rates and risk-aversion, emphasizing the role of constraints on individual and firm behavior in ensuring the existence of and characterizing portfolio equilibrium. Under certain conditions on the securities available in the market, which also are required for shareholders to be unanimous in supporting firm value maximization, investors will be segmented by tax rate into two groups, one specialized in equity and the other in debt. Though the relative wealths of the two groups determines the aggregate debt-equity ratio, each firm will be indifferent to its financial policy.

Download or read book Dividend Taxes and International Portfolio Choice written by Mihir A. Desai and published by . This book was released on 2009 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book A General Equilibrium Model of Housing Taxes and Portfolio Choice written by James A. Berkovec and published by . This book was released on 2010 with total page 50 pages. Available in PDF, EPUB and Kindle. Book excerpt: We describe a model in which rental and owner housing are risky assets, tenure choice is endogenous, and each household is constrained to consume the same amount of owner housing as it has in its investment portfolio. At each iteration in the search for an equilibrium, we determine the new taxable income for each of 3,578 households (from the Survey of Consumer Finances), and we use statutory schedules to find the marginal rate and tax paid. Equilibrium net rates of return are major determinants of the amount of owner housing, but a logit model indicates that demographic factors are the main determinants of ownership rates. A simulation of taxes on owner housing raises welfare not only by re-allocating capital, but also because government takes part of the risk from individual properties and diversifies it away. Measures to disallow property tax or mortgage interest deductions do not help share this risk. Simulations of actual tax reform indicate a small shift from rental to owner housing, and welfare gains from re-allocating risk.

Download or read book Embedded Tax Liabilities Portfolio Choice written by Phillip Ashley Turvey and published by . This book was released on 2014 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This study presents an improved method of dealing with embedded tax liabilities in portfolio choice. We argue that using a risk-free discount rate is appropriate for calculating the present value of future tax liabilities. Supportive of recent research, our results found a taxation-induced preference of holding equities over bonds, and a location preference of holding equities in the taxable account and bonds in retirement accounts. These important findings contrast with traditional investment advice which suggests a greater capacity for risk in retirement accounts.

Download or read book Effects of Taxation on Household Portfolio Choice and Risk Taking written by Joongwoo Ahn and published by . This book was released on 1997 with total page 158 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Capital Income Taxation with Portfolio Choice written by Ivo Bakota and published by . This book was released on 2020 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: