Capital gains tax and individual trading: The case of Japan |
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Authors: | Minoru Hayashida Hiroyuki Ono |
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Affiliation: | a Faculty of Economics and Business Administration, The University of Kitakyushu, 4-2-1 Kitagata, Kokuraminami-ku, Kitakyushu 802-8577, Japan;b Faculty of Economics, Toyo University, 5-28-20 Hakusan, Bunkyo-ku, Tokyo 112-8606, Japan |
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Abstract: | Japan implemented a capital gains tax reform and reduced its flat rate in 2003. This study attempts to explain how this has contributed to the recent surge of individual trading, using three different methods of analysis. First, we perform a time-series analysis with the aggregate, market-level data. Second, we use firm-level, by-stock data to conduct a similar time-series analysis, as well as a panel data analysis. Third, we examine the price-change sensitivity of winners’ volume before and after the reform. The results clearly indicate that the tax cut has helped expand individual trading, as the average tax rate negatively correlates significantly with individual trading. |
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Keywords: | Capital gains tax Japan Stock market Individual trading |
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