The current capital gains tax law stipulates that the tax rate for short-term investment (gains and losses) and long-term losses is equal to an investor's marginal ordinary income tax rate, which implies that this rate for low income investors can be significantly lower than that for high income...

We develop an optimal tax timing model that takes into account asymmetric long-term and short-term tax rates for positive capital gains and limited tax deductibility of capital losses. In contrast to the existing literature, this model can help explain why many investors not only defer...

Extant theories on the disposition effect are largely silent on most of the related trading patterns, including the V-shape results for probabilities of buying and selling against unrealized profit. On the other hand, portfolio rebalancing and learning have been shown to be important, even for...

Most existing portfolio choice models ignore the prevalent periodic market closure and the fact that market volatility is significantly higher during trading periods. We find that market closure and the volatility difference across trading and nontrading periods significantly change optimal...

Most existing portfolio choice models ignore periodic market closure and the fact that market volatility is significantly higher during trading periods. We show that market closure and the volatility difference across trading and nontrading periods significantly change optimal trading strategies...

Although prevalent in the financial markets, transaction costs have been largely ignored in the existing literature on the impact of capital gains tax. We develop a dynamic portfolio model that incorporates both transaction costs and annually payable capital gains taxes. We theoretically...

Mutual funds are often restricted to allocate certain percentages of fund assets to certain securities that have different degrees of illiquidity. However, the existing literature on how mutual funds should trade has largely ignored the coexistence of position limits and differential illiquidity...