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Symposium. All errors are our own. Tax-Loss Selling and the January Effect:

expressed herein are those of the authors and not necessarily those of the National Bureau of Economic

workshop participants at the 1999 Duke/North Carolina Accounting Research Fall Camp and the Duke/North Carolina public finance workshop. We also acknowledge the contribution of I/B/E/S International Inc. for providing earnings per share forecast data available through the Institutional Brokers Estimate System. These data have been provided as part of a broad academic program to encourage earnings expectations. The views expressed herein are those of the authors and do not necessarily reflect the position of the National

We thank an anonymous discount broker for providing data on individual investors ’ trades and Terry Odean for his help in obtaining and understanding the data set. Ivković and Weisbenner acknowledge the financial

This paper enlarges the current research on window dressing practice on strategic allocations. The existence of window dressing is of special interest for investors in order to know whether portfolio holdings vary across months with public portfolio disclosures. The monthly bias free sample of bond funds contributes to the scarce works on this phenomenon in the literature. The monthly frequency provides a more comprehensive analysis than the quarterly perspective traditionally applied in previous research. A comparison between disclosed and undisclosed portfolios is followed by the test of the window dressing practice on public debt allocations. We carry out complementary analyses such as the seasonality of this practice or the significance of some fund characteristics (size, fees, age and past returns). Empirical evidence also shows that some funds significantly modify portfolios prior to disclosure decreasing the public debt allocation, but it is not a general behaviour in the sector.

Closed-end country funds trade in New York at their price. Their Net Asset Value (NAV) represent the value of the underlying assets, usually traded in each particular country. If the holders of the underlying assets have more information the about local assets than the country fund holders, changes in NAVs will tend to explain future changes in prices but not vice versa. This paper shows that most NAVs appear exogenous; while most prices reject exogeneity. Past changes in NAVs and discounts predict current prices more frequently than prices and discounts predict NAVs. The price (NAV) adjustment coefficients are low and negatively correlated with the local (foreign) market variability--but not with the fund price (NAV) variability. These findings are consistent with the existence of asymmetric information in international capital markets. The appendix introduces a model of asymmetric information, that rationalizes our empirical findings. Different perceived risk makes foreign investors willing to less pay for local assets than domestic investors. Therefore, country fund prices (driven mainly by small U.S. investors) tend to be lower than NAVs (driven mainly by domestic and large foreign investors). Two other propositions are derived. First, since NAVs and prices are linked by a long-run

The consistency of positive past returns and tax-loss selling significantly affects the relation between past returns and the cross-section of expected returns. Analysis of these additional effects across stock characteristics, seasons, and tax regimes provides clues about the sources of temporal relations in stock returns, pointing to potential explanations for this relation. A parsimonious trading rule generates surprisingly large economic returns despite controls for confounding sources of return premia, microstructure effects, and data snooping biases. JEL classification: G11; G12; G14

Predicting stock price movements from past returns: the role of consistency and tax-loss selling $

We use a large database, containing nearly 100,000 large individual stock purchases, to study the factors that affect the realization of capital gains and losses. These factors include the holding period, the calendar month, and the accrued gain or loss since the time of purchase. A particularly appealing feature of the data set is the ability to compare investors ’ realizations in their taxable and tax-deferred accounts. We reach four conclusions. First, for large stock purchases, we find a strong lock-in effect for capital gains in taxable accounts after the stock has been held for a few months. Second, we find evidence of trading behavior that is consistent with year-end tax-loss selling. In taxable accounts in December, and especially in the last week of December, investors are more likely to sell losers than winners. The pattern for other months is the reverse. The December selling effect is particularly strong for stocks that qualify for short-term loss treatment. We find that tax-loss selling is greater for investors who have realized gains during the year and the when the overall market has risen during the about-to-end calendar year. The demand for loss offsets is likely to be high in these settings. Third, we find evidence that wash sale rules affect trading decisions in December, but we do not find similar