Capital gains taxes and the market response to public announcements in an indexation-based tax regime

Greg Clinch*, Mahmoud Odat

*Corresponding author for this work

Research output: Contribution to journalArticle

1 Citation (Scopus)

Abstract

This paper addresses the impact of capital gains taxes on the market price and trading volume response to public announcements in an indexation-based tax regime. Our analysis indicates that indexation makes share prices more responsive to public announcements. Moreover, 'over responsiveness' induces negative correlation between short-term price changes around the public announcement and subsequent long-term price movements. This effect is greater when anticipated inflation is higher. Our analysis also indicates that trading volume is increasing in price changes around the public announcement.

Original languageEnglish
Pages (from-to)53-63
Number of pages11
JournalJournal of Contemporary Accounting and Economics
Volume8
Issue number2
DOIs
Publication statusPublished - 1 Dec 2012
Externally publishedYes

Keywords

  • Capital gains tax
  • Indexation
  • Public information

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