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This paper studies the corporate policy distortions caused by realization-based capital gains taxation at the personal level in a dynamic trade-off theory model. The Lock-in effect of embedded capital gains creates severe conflicts of interest between incumbent and new investors. The firm's...
Persistent link: https://www.econbiz.de/10005612056
We develop a simple rational model of active portfolio management that provides a natural benchmark against which to evaluate observed relationship between returns and fund flows. Many effects widely regarded as anomalous are consistent with this simple explanation. In the model, investments...
Persistent link: https://www.econbiz.de/10005771770
Build America Bonds (BABs) were issued by municipalities for 20 months as a part of the 2009 fiscal package. Unlike traditional tax-exempt municipals, BABs are taxable to the holder, but the Treasury rebates 35% of the coupon to the issuer. The stated purpose was to provide municipalities access...
Persistent link: https://www.econbiz.de/10011042905
We study price discovery in municipal bonds, an important OTC market. As in markets for consumer goods, prices "rise faster than they fall." Round-trip profits to dealers on retail trades increase in rising markets but do not decrease in falling markets. Further, effective half-spreads increase...
Persistent link: https://www.econbiz.de/10008671146
Persistent link: https://www.econbiz.de/10005478116
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Municipal bonds trade in opaque, decentralized broker-dealer markets in which price information is costly to gather. Whether dealers in such a market operate competitively is an empirical issue, but a difficult one to study because data in such markets is generally not centrally recorded. We...
Persistent link: https://www.econbiz.de/10005073615
We compute the value of a firm that pays its cash flows each period through share repurchases in a dynamic environment where personal taxes are paid on realized capital gains and dividends. These results provide a measure of the personal tax advantages of equity financing relative to debt...
Persistent link: https://www.econbiz.de/10005029148
Empirical evidence shows that observed macroeconomic fundamentals have little explanatory power for nominal exchange rates (the exchange rate determination puzzle). On the other hand, the recent \microstructure approach to exchange rates" has shown that most exchange rate volatility at short to...
Persistent link: https://www.econbiz.de/10005771762
This article applies regime-switching models to assess the effects of different regimes of volatility in asset pricing. Different variance-covariance matrices for different regimes of volatility are introduced in the Capital Asset Pricing Model. They are scaled with respect to a conditional...
Persistent link: https://www.econbiz.de/10005771763