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Investor behaviour in response to Australia’s capital gains tax

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  • Philip Brown
  • Andrew Ferguson
  • Sam Sherry

Abstract

We calibrate the effect of Australia’s Capital Gains Tax (CGT) on share prices and market activity. Based on a large sample drawn from all listed Australian companies for the years 1994–2007, we find significant tax‐loss selling (TLS) of shares that lost value over the financial year, which is reflected in unusually high trading volume and more sell orders in June and a rebound in July. There is some evidence that small mining stocks are particular targets for TLS. Interestingly, the 1999 CGT reforms, which introduced concessions for long‐term capital gains, did not reduce the incidence of TLS.

Suggested Citation

  • Philip Brown & Andrew Ferguson & Sam Sherry, 2010. "Investor behaviour in response to Australia’s capital gains tax," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 50(4), pages 783-808, December.
    • Handle: RePEc:bla:acctfi:v:50:y:2010:i:4:p:783-808
    DOI: 10.1111/j.1467-629X.2010.00352.x
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    Cited by:

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    2. Dean Hanlon & Sean Pinder, 2013. "Capital gains tax, supply-driven trading and ownership structure: direct evidence of the lock-in effect," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 53(2), pages 419-439, June.
    3. Ha Vu & Sean Turnell, 2019. "Seasonality in the Australian Stock Market," Applied Economics and Finance, Redfame publishing, vol. 6(5), pages 158-167, September.

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