New evidence on the impact of size and taxation on the seasonality of UK equity returns |
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| Authors: | Kojo Menyah |
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| Institution: | 1. Mays Business School, Texas A&M University, College Station, TX 77843, United States;2. Mendoza College of Business, University of Notre Dame, Notre Dame, IN 46556, United States;3. Bryan School of Business and Economics, University of North Carolina at Greensboro, Greensboro, NC 27412, United States;1. School of Business Administration, University of California, Riverside, Anderson Hall 0129, 900 University Avenue, Riverside, CA 92521, USA;2. INSEAD, Boulevard de Constance, 77305 Fontainebleau Cedex, France;3. PBC School of Finance, Tsinghua University, 43 Chengfu Road, Haidian District, Beijing 100083, PR China |
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| Abstract: | The paper investigates the extent to which capital gains taxation and the portfolio rebalancing hypothesis may account for the seasonality of UK equity returns. The empirical results show that in small firm portfolios during the period of capital gains taxation, April but not January seasonality is consistent with the tax-loss selling hypothesis. The January seasonality, which is detected even before the introduction of capital gains taxation, is also consistent with the portfolio rebalancing hypothesis until the 1980s, when such seasonality becomes increasingly insignificant. |
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| Keywords: | Seasonality Tax-loss selling Portfolio rebalancing Hypothesis |
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