How do taxes affect the trading behavior of private investors? Evidence from individual portfolio data

Arbeitspapier

We exploit a large reform of capital-gains taxation in Germany combined with portfolio-level daily panel data to study the causal effect of taxes on individual stock-trading behavior and the disposition effect. We find substantial spikes in selling probabilities around an intertemporal tax discontinuity, and no such spikes after the abolishment of the discontinuity. Using difference-in-bunching methods, non-parametric regressions and effective tax rates, we quantify the tax effect and identify interesting patterns of heterogeneity. We further find evidence that the well-established disposition effect is strongly affected by the tax discontinuity through tax motivated selling of both gains and losses.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: ZEW Discussion Papers ; No. 20-047

Classification and Topics

• Classification: Wirtschaft ; Taxation, Subsidies, and Revenue: General ; Duration Analysis; Optimal Timing Strategies ; Household Saving; Personal Finance ; Portfolio Choice; Investment Decisions
• Subject: Taxation ; Capital-gains ; Private investors ; Trading Behavior ; Disposition Effect

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Buhlmann, Florian ; Doerrenberg, Philipp ; Voget, Johannes ; Loos, Benjamin
• Event: Veröffentlichung
• (who): ZEW - Leibniz-Zentrum für Europäische Wirtschaftsforschung
• (where): Mannheim
• (when): 2020

Further information

• Handle: http://hdl.handle.net/10419/225078
• Last update: 10.03.2025, 11:44 AM CET