Long-Term Return Reversals: Overreaction or Taxes?

摘要

Long-term reversals in U.S. stock returns are better explained as the rational reactions of investors to locked-in capital gains than an irrational overreaction to news. Predictors of returns based on the overreaction hypothesis have no power, while those that measure locked-in capital gains do, completely subsuming past returns measures that are traditionally used to predict long-term returns. In data from Hong Kong, where investment income is not taxed, reversals are nonexistent, and returns are not fore-castable either by traditional measures or by measures based on the capital gains lock-in hypothesis that successfully predict U.S. returns.