TAX‐TIMING OPTIONS AND THE PRICING OF GOVERNMENT BONDS

Andrea Heuson, Dennis J. Lasser

Research output: Contribution to journalArticle

3 Citations (Scopus)

Abstract

Internal Revenue Code provisions affect trading strategies for long‐term, fixed‐payment securities when investment income is subject to taxation and can create tax‐timing options of varying nontrivial values for specific bonds at specific times. In this paper, an estimate of the tax bracket of the marginal investor is used to measure the relative impact of changing tax‐timing option values on government bond prices. Results support the argument that tax‐timing options help to explain an apparent discrepancy between theoretical arguments regarding the tax bracket of the marginal investor and observed market relationships.

Original languageEnglish (US)
Pages (from-to)93-103
Number of pages11
JournalJournal of Financial Research
Volume13
Issue number2
DOIs
StatePublished - Jan 1 1990

Fingerprint

Tax
Pricing
Government bonds
Investors
Discrepancy
Income
Trading strategies
Taxation
Bond prices
Option value
Revenue

ASJC Scopus subject areas

  • Accounting
  • Finance

Cite this

TAX‐TIMING OPTIONS AND THE PRICING OF GOVERNMENT BONDS. / Heuson, Andrea; Lasser, Dennis J.

In: Journal of Financial Research, Vol. 13, No. 2, 01.01.1990, p. 93-103.

Research output: Contribution to journalArticle

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