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An Empirical Examination of Tax Factors and Mutual Funds' Stock Sales Decisions

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Abstract

We examine whether taxes affect stock sales by mutual funds. For certain funds, the expected amount of a given stock sold in a given quarter is 62% greater when liquidation would trigger a capital loss equal to 1% of the value of the portfolio than when a like-size gain would be triggered, a greater effect than is associated with either contemporaneous excess stock returns of 50% or unexpected EPS equal to 50% of the stock price. For growth funds, responses to tax factors are consistent from year to year, and dispositions vary with the year-to-date realized gain.

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Authors
  1. Steven Huddart
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  2. V. G. Narayanan
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Huddart, S., Narayanan, V.G. An Empirical Examination of Tax Factors and Mutual Funds' Stock Sales Decisions. Review of Accounting Studies 7, 319–341 (2002). https://doi.org/10.1023/A:1020250708495

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  • DOI: https://doi.org/10.1023/A:1020250708495

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