Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/125447 
Year of Publication: 
2015
Series/Report no.: 
Diskussionsbeiträge No. 2015/33
Publisher: 
Freie Universität Berlin, Fachbereich Wirtschaftswissenschaft, Berlin
Abstract: 
We argue that the tax capitalization effect is a function of the attention of market participants. Market reactions can therefore be driven not only by the announcement dates of tax events but also by factors influencing the dissemination of tax information, such as deadlines and media reports. Analyzing the introduction date of the earlier-announced German capital gains tax reform of 2009 by triple-difference estimation, we find evidence of a delayed market reaction long after the announcement date. Within the last two (five) trading days before the deadline, we observe a sharp increase in abnormal trading volumes of 151.7% (104.0%). The aggregate abnormal return of the German capital market in the last five trading days in 2008 was 10.6%. Furthermore, we find a significant and positive correlation between trading volumes and measures for awareness of the upcoming tax reform (Google searches and media reports).
Subjects: 
capital gains tax
asset pricing
tax awareness
tax arbitrageM
turn-of-the-year effect
market efficiency
JEL: 
G02
G12
H24
M41
Document Type: 
Working Paper

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