A MODEL OF TRADING VOLUME WITH TAX-INDUCED HETEROGENEOUS VALUATION AND TRANSACTION COSTS

Authors
MICHAELY R VILA JL WANG J
Citation
R. Michaely et al., A MODEL OF TRADING VOLUME WITH TAX-INDUCED HETEROGENEOUS VALUATION AND TRANSACTION COSTS, Journal of financial intermediation, 5(4), 1996, pp. 340-371
Citations number
32
Categorie Soggetti
Business Finance
Journal title
Journal of financial intermediation → ACNP
ISSN journal
10429573
Volume
5
Issue
4
Year of publication
1996
Pages
340 - 371
Database
ISI
SICI code
1042-9573(1996)5:4<340:AMOTVW>2.0.ZU;2-Y
Abstract
We develop a model of trading volume when agents have different valuat ion and face transaction costs. In particular, the differential valuat ion is induced by differential tax status which generates trading arou nd the distribution of cash dividends. Our model predicts that trading volume is negatively affected by idiosyncratic risk of dividend-payin g stocks. Volume is negatively affected by the systematic risk of thes e stocks only in the presence of transaction costs. (C) 1996 Academic Press, Inc.