Portfolio Tax Trading with Carryover Losses

• 成果类型: Article
• 署名作者: Ehling, Paul; Gallmeyer, Michael; Srivastava, Sanjay; Tompaidis, Stathis; Yang, Chunyu
• 署名单位: BI Norwegian Business School; University of Virginia; University System of Georgia; Georgia State University; University of Texas System; University of Texas Austin
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.2017.2733
• 发表日期: 2018
• 页码: 4156-4176
• 关键词: portfolio choice; capital gains taxation; Limited use of capital losses; carryover losses

摘要

We study portfolio choice with multiple stocks and capital gains taxation, assuming that capital losses can only offset current or future realized capital gains. We show, through backtesting using empirical distributions, that optimal equity holdings over an extended period are significantly lower on average than benchmark holdings suggested in the literature. Using value and growth or small and large portfolios, the backtests show that allocations remain persistently underdiversified. Carryover losses have large economic significance since they can dramatically shrink the no-trade region. Finally, the backtested economic cost of incorrectly modeling capital losses is at least 8% of lifetime wealth.