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 language | English |
|---|---|
| Pages (from-to) | 53-63 |
| Number of pages | 11 |
| Journal | Journal of Contemporary Accounting and Economics |
| Volume | 8 |
| Issue number | 2 |
| DOIs | |
| Publication status | Published - 1 Dec 2012 |
| Externally published | Yes |
Keywords
- Capital gains tax
- Indexation
- Public information