1. Tax-Induced Trading and the Turn-of-the-Year Anomaly: An Intraday Study.
- Author
-
Griffiths, Mark D. and White, Robert W.
- Subjects
TAXATION of investments ,STOCK prices ,TAXATION ,BUSINESS ,ASKED price ,FISCAL year ,PURCHASING agents ,BID price - Abstract
This study tests the tax-induced trading hypothesis as an explanation of the turn-of-the-year anomaly using Canadian and U.S. intraday data. Since the Canadian tax year-end precedes the calendar year-end by five business days, tax effects may be isolated. We find the anomaly is related to the degree of seller- and buyer-initiated trading and depends upon the incidence of the taxation year-end. Seller-initiated transactions (at bid prices) dominate until the tax year-end after which buyer-initiated trades (at ask prices) dominate. The anomaly is a function of bid-ask prices. [ABSTRACT FROM AUTHOR]
- Published
- 1993
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