Tax Changes and Asset Pricing: An Investigation of the Time-Series Evidence
نویسنده
چکیده
This study investigates whether personal taxes are related to asset valuations. The effective tax rate of investment income fluctuated considerably since federal income taxes were introduced. The main result of the paper demonstrates that there is an economically and statistically significant relationship between asset valuations and personal tax rates. Stock valuations tend to be higher when taxes are low and lower when taxes are high. This result is consistent with the observation that stock and bond returns tend to be higher in periods when taxes decrease and lower when taxes increase. JEL Classification: G12, H20, E44
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