TY  - JOUR
AU  - Ivkovich,Zoran
AU  - Poterba,James
AU  - Weisbenner,Scott
TI  - Tax-Motivated Trading by Individual Investors
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 10275
PY  - 2004
Y2  - February 2004
UR  - http://www.nber.org/papers/w10275
L1  - http://www.nber.org/papers/w10275.pdf
N1  - Author contact info:
Zoran Ivkovich
Department of Finance
Michigan State University
315 Eppley Center
East Lansing, MI 48824
Tel: (517) 353-4593
E-Mail: ivkovich@bus.msu.edu

James M. Poterba
Department of Economics
MIT, E52-350
50 Memorial Drive
Cambridge, MA  02142-1347
Tel: 617/253-6673
Fax: 617/258-7804
E-Mail: poterba@nber.org

Scott Weisbenner
University of Illinois at Urbana-Champaign
Department of Finance
340 Wohlers Hall, MC-706
1206 South Sixth Street
Champaign, IL  61820
Tel: 217/333-0872
Fax: 217/244-9867
E-Mail: weisbenn@illinois.edu
AB  - We use data on the stock trades of a large number of individual investors to study how tax incentives affect the realization of capital gains and losses. We compare investors' realizations in their taxable and tax-deferred accounts, which allows us to identify tax-motivated trading. We reach three conclusions. First, we find a strong lock-in effect for capital gains in taxable accounts relative to tax-deferred accounts. The capital gains lock-in effect is stronger for large than for small transactions, and it intensifies at longer holding periods. Second, we find tax-loss selling throughout the calendar year, though it is most pronounced in December, particularly if the investor has realized capital gains elsewhere in the portfolio during the year. Third, we observe substantial heterogeneity in individual investors' propensity to trade. Controlling for this heterogeneity, however, does not alter the relationship between a stock's past performance and the realization decision.
ER  -