Abstract
Paying taxes is universally disliked. Tax-loss harvesting strategies help offset the capital gains tax investors incur. Tax-loss harvesting involves selling stocks that have returned negative over a recent time period. These recognized losses can offset investment gains and therefore lower the investor’s capital gains tax bill. The authors argue that tax-loss harvesting strategies are smart beta momentum strategies in disguise. They also argue that just as momentum strategies are managed year-round, tax-loss harvesting strategies should be too, not just in December.
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