Hedge funds are characterized by a significant complexity of their tax attributes. In this paper, we explain how hedge fund investors might be affected by a limitation on excess business losses codified in a new IRC Section 461(l), introduced as a part of the TCJA of 2017 and later amended by...

We study in this paper the consequences of short selling in the context of quantitative investment strategies. Short positions not only allow investors to benefit from the anticipated underperformance of securities, they can also create tax benefits because they enhance the opportunities to time...

We describe a Tax-Aware Defensive Equity Long-Short (TADELS) strategy, including its construction and pre-tax and after-tax performance. TADELS closely replicates the pre-tax performance of a similar tax-agnostic strategy and has the potential to achieve a meaningful tax benefit for a taxable...

For a taxable investor with a highly appreciated equity portfolio, replacing the portfolio manager is likely to trigger substantial tax liabilities. We focus on transitioning an appreciated equity portfolio to an actively managed strategy. We compare transition from an appreciated portfolio to a...

In April 2000, in one day, 30 stocks were replaced in the Nikkei 225 index in Japan. We analyze the change in comovement of returns of stocks added to and deleted from the index with the returns of stocks remaining in the index. A simple model shows that upon inclusion into (deletion from) a...

Recent empirical literature finds that institutions as a group outperform the rest of the market, before costs. This paper argues that institutional strategy in small stocks during 1980s and 1990s was largely driven by factors other than expectations of stock returns. We propose a decomposition...

Limited partnerships are attractive investment vehicles for investors because, as limited partners, investors cannot lose more than their invested capital despite the leverage of the partnership's portfolio. Consistent with this, the availability of tax losses to a limited partner is also more...

In April 2000, 30 stocks were replaced in the Nikkei 225 Index. The unusually broad index redefinition allowed for a study of the effects of index-linked trading on the excess comovement of stock returns. A large increase occurred in the correlation of trading volume of stocks added to the index...

Preservation and transfer of wealth to future generations is one of the central financial goals for most high-net-worth families. In this study, using a stylized theoretical model and Monte-Carlo simulations, we quantify the benefits of income and estate tax planning for growing wealth over...