We argue that the impact of capital gains taxation on asset pricing depends on the tax awareness of market participants. While institutional investors should be generally well-informed about tax regulations, private investors have only limited tax knowledge and resources. As a result, market reactio...

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Bibliographic Details

Main Authors:	Eichfelder, Sebastian 1976- (Author), Lau, Mona (Author)
Format:	Electronic eBook
Language:	English
Published:	Berlin Freie Univ. Berlin, FB Wirtschaftswiss. 2014
Series:	Discussion paper / School of Business & Economics 2014,17 : FACTS
Subjects:	Geschichte 2008-2009 Kapitalertragsteuer Steuerreform Deutschland
Online Access:	Volltext
Summary:	We argue that the impact of capital gains taxation on asset pricing depends on the tax awareness of market participants. While institutional investors should be generally well-informed about tax regulations, private investors have only limited tax knowledge and resources. As a result, market reactions on tax law changes may be delayed if a considerable fraction of market participants is not fully tax-aware. In line with our argument, we find evidence that the introduction of a previously announced German flat tax on private capital gains in 2009 resulted in a temporarily strong and significant increase of trading volumes, daily returns and asset prices. Our research implies that tax law changes provide an opportunity for well-informed investors to generate arbitrage benefits. Corresponding to our estimate, the capital gains tax resulted in an increase demand for shares of 160 % as well as in an price surplus of about 7.4 % within the last two trading days 2008.
Physical Description:	1 Online-Ressource (31 S.) graph. Darst.