Investor behaviour in response to Australia's capital gains tax

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Journal Article
Accounting and Finance, 2010, 50 (4), pp. 783 - 808
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We calibrate the effect of Australia's Capital Gains Tax (CGT) on share prices and market activity. Based on a large sample drawn from all listed Australian companies for the years 1994-2007, we find significant tax-loss selling (TLS) of shares that lost value over the financial year, which is reflected in unusually high trading volume and more sell orders in June and a rebound in July. There is some evidence that small mining stocks are particular targets for TLS. Interestingly, the 1999 CGT reforms, which introduced concessions for long-term capital gains, did not reduce the incidence of TLS. © 2010 The Authors. Accounting and Finance © 2010 AFAANZ.
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