Tax-Loss Selling and the January Effect: Evidence from Municipal Bond Closed-End Funds
This paper provides direct evidence supporting the tax-loss selling hypothesis as an explanation of the January effect. Examining turn-of-the-year return and volume patterns for municipal bond closed-end funds, which are held mostly by tax-sensitive individual investors, we document a January effect for these funds, but not for their underlying assets. We provide evidence that this effect can be largely explained by tax-loss selling activities at the previous year-end. Moreover, we find that funds associated with brokerage firms display more tax-loss selling behavior, suggesting that tax counseling plays a role. Copyright 2006 by The American Finance Association.
Year of publication: |
2006
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Authors: | STARKS, LAURA T. ; YONG, LI ; ZHENG, LU |
Published in: |
Journal of Finance. - American Finance Association - AFA, ISSN 1540-6261. - Vol. 61.2006, 6, p. 3049-3067
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Publisher: |
American Finance Association - AFA |
Saved in:
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