@article {Mladinajwm.2020.1.112, author = {Peter Mladina}, title = {Refining After-Tax Return and Risk Parameters}, elocation-id = {jwm.2020.1.112}, year = {2020}, doi = {10.3905/jwm.2020.1.112}, publisher = {Institutional Investor Journals Umbrella}, abstract = {Taxes introduce certain complexities, requiring proper adjustments to return and risk parameters. The author offers a refined set of after-tax return and risk equations for use in practice and validates them with a stochastic future value cash flow model. The refined after-tax return and risk parameters can be used in portfolio optimization, Monte Carlo simulation, and deterministic present/future value portfolio modeling with internally consistent results. The refinements improve the discovery of the optimal after-tax portfolio and enhance long-term wealth planning in the presence of risk.TOPIC: Wealth managementKey Findings{\textbullet} After-tax return and risk parameters are necessary for efficient asset allocation and accurate wealth planning. {\textbullet} Parameters must incorporate tax complexity while producing internally consistent results across portfolio optimization, Monte Carlo simulation and deterministic modeling. {\textbullet} Refinements include the arithmetic-geometric return treatment with tax, a more precise incorporation of the effective annual capital gains tax rate, and risk manifesting in the price return across the distribution.}, issn = {1534-7524}, URL = {https://jwm.pm-research.com/content/early/2020/05/23/jwm.2020.1.112}, eprint = {https://jwm.pm-research.com/content/early/2020/05/23/jwm.2020.1.112.full.pdf}, journal = {The Journal of Wealth Management} }