Optimal Tax-Timing with Transaction Costs (with Min Dai, Yaoting Lei, and Hong Liu).
- submitted. [Abstract|SSRN]
-
-
- We develop a dynamic portfolio model incorporating capital gains tax (CGT), transaction costs, and
- year-end taxation. We find that even tiny transaction costs can lead to significant deferral of
- large losses and transaction costs affect loss deferrals much more than gain deferrals. Our model
- can thus help explain the puzzle that even when investors face equal long-term/short-term CGT rates,
- they may still defer realizing large capital losses for an extended period of time, displaying the
- disposition effect. In addition, we find misestimating transaction costs is costly. We also provide
- several unique, empirically testable predictions and shed light on recently proposed tax policy
- changes.
-
-
-
Optimal Design of Automated Market Makers on Decentralized Exchanges (with Xuedong He and Yutian Zhou). submitted. [Abstract|
+
Optimal Tax-Timing with Transaction Costs (with Min Dai, Yaoting Lei, and Hong Liu).
+ Management Science, Accepted For Publication. [Abstract|SSRN]
+
+
+ We develop a dynamic portfolio model incorporating capital gains tax (CGT), transaction costs, and
+ year-end taxation. We find that even tiny transaction costs can lead to significant deferral of
+ large losses and transaction costs affect loss deferrals much more than gain deferrals. Our model
+ can thus help explain the puzzle that even when investors face equal long-term/short-term CGT rates,
+ they may still defer realizing large capital losses for an extended period of time, displaying the
+ disposition effect. In addition, we find misestimating transaction costs is costly. We also provide
+ several unique, empirically testable predictions and shed light on recently proposed tax policy
+ changes.
+