Monthly Archives: March 2015

CAPITAL GAINS TAXES: Empirical Analysis 5

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All control variables are collected from Compustat.20 To avoid extreme observations, values of Debt/Assets, Return on Assets and Book/Market are trimmed at the 1st and 99th percentiles. Inferences are insensitive to this trimming. Table 1 presents descriptive statistics for the control variables, split between dividend-paying and non-dividend-paying stocks. Not surprisingly, dividend-paying stocks are larger, on […]

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CAPITAL GAINS TAXES: Empirical Analysis 4

Rough approximations using the regression coefficient estimates provide some confidence that coefficients are reasonable. The coefficient on the dividend status variable can be used to estimate the market’s expectation of the eventual capital gains tax rate reduction. Let 8d equal the percentage of a dividend-paying stock’s value expected to be taxed as dividends, and 8n […]

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CAPITAL GAINS TAXES: Empirical Analysis 3

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To control for the normal covariability between dividend and non-dividend stocks, we estimate a regression of each firm’s weekly return for the 129 weeks from January 1995 through the event week (239,296 observations) on two variables: (a) the average return for dividend-paying stocks during the week and (b) a categorical variable for non-dividend-paying stocks in […]

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CAPITAL GAINS TAXES: Empirical Analysis 2

The return is computed over the five-day period, Tuesday, April 29, 1997 through Monday, May 5, 1997, during which most of the uncertainty surrounding the budget agreement was resolved. One advantage of the budget agreement for this analysis is that few specific provisions in the agreement (other than the capital gains change) clearly benefit one […]

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